Pharmaceutical Regulation Case Study

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In this report the role of the government in pharmaceutical regulation will be explored. Examples of how the government regulates the pharmaceutical industry will be presented; furthermore, each event will be analysed to determine whether the regulation was from a public or private interest theory perspective. In the end the goal is to reveal the dominant theory of regulation in the industry and which theory better predicts the outcome of events presented.

The government’s role in the pharmaceutical industry always starts with a regulatory body. In Canada, the main regulator for pharmaceuticals is Health Canada. The counterpart in the United States is the Food and Drug Administration (FDA). The regulatory body is tasked with ensuring the
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In this step, most of the economic forces come into play; namely pricing and competition. In terms of pricing, does the company price its drugs above its production costs or does it research the price that the market would bear? (Hooper, 2008). The answer is never that easy. Companies that wish to maximise profit will set high prices for consumers that are willing to pay; however, the same drug in a poor country might be priced lower (Hooper, 2008). The drug Crixivan, for example, is priced differently in Africa than it is in the US. Merck, the company that manufactures Crixivan is able to charge over six thousand dollars for a year’s supply in the US; however, the same drug costs six hundred dollars in Africa for a year’s supply (Hooper, 2008). The other economic force is competition. Although brand-name drug manufacturers do compete between each other based on price, another form of competition, which will be discussed later, is the rise of the generics industry. The rise of the generics industry can be contributed to government policy whereby governments allow generic-drug makers to conduct research on patented drugs prior to the expiry of the patent. This presents consumers with a lower cost equivalent of the brand name drug. The ascent of generic-drug manufacturers, could be argued, is attributed to the public interest theory of regulation. It’s important to note that although generic-drug manufacturers mean well by making lower cost drugs, they are a business and will also seek to maximise profit through unethical

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