Pharmaceutical Market Failure
EEP ASSIGNMENT
PHARMACEUTICAL INDUSTRY
SUBMITTED TO:
PROF. JEEMOL UNNI
SUBMITTED BY:
PUNEET JAIN (33101)
Market Failure
The involvement of government in the pharmaceutical sector has been to a much greater extent when compared to other sectors. We have studied that in the scenario of “Perfect Markets” where consumers and sellers are left to their own to carry out business activities lead to an optimal solution. However it’s a bit different in case of pharmaceutical sector, because if pharmaceutical companies are left to their own to deal with the consumers, there are high chances of market failure.
Forms of market failure 1. Information Asymmetry
Information asymmetry or imbalance is one of the prime reasons of market failure in pharmaceutical sector. For different commodities such as vegetables, fruits and others, both buyers and sellers are equally aware about its value for money and quality. But in case of pharmaceutical drugs, one party tends to know much more than the other and most often it’s the end consumers that suffer. This becomes one of the main reasons for market failure in this sector
Informational problems occurring are about the: * Drug Efficacy: the true efficacy of the drug is known to the manufacturer and both the dispenser and user of the drug remain dependent on the manufacturer for most of the information regarding its efficacy.
* Drug Quality: the question about safety and quality of the drug is always a critical one and the countries having weak regulatory authorities witness the marketing of spurious and unsafe drugs.
* Appropriateness of the drug: the patient to whom the drug is recommended always knows a bit less than the prescriber about its appropriateness for a particular disease.
Government Response
Information imbalance results in the prescriber giving misleading advice to the patient in order to increase his own profit. Some prescribers may not have complete information about the drugs being prescribed and
PHARMACEUTICAL INDUSTRY
SUBMITTED TO:
PROF. JEEMOL UNNI
SUBMITTED BY:
PUNEET JAIN (33101)
Market Failure
The involvement of government in the pharmaceutical sector has been to a much greater extent when compared to other sectors. We have studied that in the scenario of “Perfect Markets” where consumers and sellers are left to their own to carry out business activities lead to an optimal solution. However it’s a bit different in case of pharmaceutical sector, because if pharmaceutical companies are left to their own to deal with the consumers, there are high chances of market failure.
Forms of market failure 1. Information Asymmetry
Information asymmetry or imbalance is one of the prime reasons of market failure in pharmaceutical sector. For different commodities such as vegetables, fruits and others, both buyers and sellers are equally aware about its value for money and quality. But in case of pharmaceutical drugs, one party tends to know much more than the other and most often it’s the end consumers that suffer. This becomes one of the main reasons for market failure in this sector
Informational problems occurring are about the: * Drug Efficacy: the true efficacy of the drug is known to the manufacturer and both the dispenser and user of the drug remain dependent on the manufacturer for most of the information regarding its efficacy.
* Drug Quality: the question about safety and quality of the drug is always a critical one and the countries having weak regulatory authorities witness the marketing of spurious and unsafe drugs.
* Appropriateness of the drug: the patient to whom the drug is recommended always knows a bit less than the prescriber about its appropriateness for a particular disease.
Government Response
Information imbalance results in the prescriber giving misleading advice to the patient in order to increase his own profit. Some prescribers may not have complete information about the drugs being prescribed and