Photo by Hush Naidoo on Unsplash
By Beth Yarze
Edited by Katie Egan
Introduction
The duality of the pharmaceutical drug industry is embodied in the dichotomous objectives of the industry itself: while drug manufacturing companies are responsible for developing and distributing critical medications, they are simultaneously incentivized to earn a profit. Given that nearly every individual will rely on pharmaceutical drugs at some point in their lifetime—be it for a temporary sickness or to manage a lifelong, chronic condition—the safety and effectiveness of pharmaceuticals is vital to maintaining the health of the U.S. population.[1] The central question regarding regulation of the industry is: can pharmaceutical companies be trusted to safely and efficiently manage consumer health at the expense of excess profit? The answer to this question remains uncertain, and changes as one considers various drug manufacturing companies. This has resulted in the lucrative industry of pharmaceutical drug regulation. Although regulation is vital for ensuring the public access to safe and effective drugs, it simultaneously cultivates and promotes structural violence, a phenomenon that occurs when a segment of the population is marginalized due to systemic injustices.
The Food and Drug Administration (FDA) is responsible for regulating the pharmaceutical drug industry in the United States. “The specialty pharmaceutical market is valued at more than $77 billion, with annual market share growth estimated at nearly 9%.”[2] Regulation of this multi-billion-dollar industry is controversial, complicated by a plethora of economic and legal considerations including questions of supply and demand, availability, liability, and the ethics of the industry itself. The FDA must test all newly-developed medications and deem them as “safe and effective” before they can legally be marketed or prescribed to consumers.[3]
Economic Costs and Benefits to Pharmaceutical Drug Regulation
Many argue that the high costs of regulating and testing drugs are far too great for an individual company to incur willingly and, thus, regulation must be mandated as law and enforced. This helps to ensure that the pharmaceutical drug market remains principally tied to consumer health and well-being. Ariel Katz states:
The standard justification for drug regulation is a perceived market failure. It is assumed that in unregulated markets, supplying firms would perform insufficient pre-market testing to avoid the high costs of such testing and/or to gain an advantage in the market as the “first movers.” Some fear such firms would also overstate positive features and understate negative ones in promoting and labeling their products.[4]
Katz’s explanation highlights how the monetary costs of regulation and the competitive nature of the market incentivize companies against excessive drug testing and clinical trials in order to both decrease production costs and allow for a quick and strategic entry into the market. However, this perspective ignores regulatory benefits that are vital for smaller or less successful drug companies, as regulations create “indirect barriers for the entry of competitors.”[5] Comparatively poor-performing companies favor regulation, which affords them time to enter the market and try to remain competitive with counterparts. On the contrary, successful companies already advancing on the path to drug production (and profit) consider such regulation to be a costly and time-consuming burden. Thus, the costs and benefits of drug regulation depend heavily on each drug company’s individual positioning within the market, making it challenging to discern whose opinion on the matter should weigh heaviest.
While it is critical to consider the presence or absence of regulations, the extent to which drug companies comply with existing regulations nevertheless determines ultimate effectiveness. In his article highlighting regulation as it ties to the FDA’s Pure Food and Drug Act, Marc Law explains how, “According to the economic approach to law enforcement, economic actors will comply with regulation if and only if the benefits of compliance with regulation exceed the costs.”[6] Thus, in order to incentivize drug companies to comply with regulations, there must be clear and present benefits that can nudge them in the direction of doing so. Drug companies should be motivated to produce the highest quality product that is least likely to harm patients. However, they are likely to be motivated by their desire to avoid incurring the potential monetary and/or litigation costs that result from negligence or failure to test and research drugs adequately as mandated by the government.
The Costliness of Drug Regulation Exposed: Sterile Injectables
One of the primary pitfalls of the pharmaceutical industry is that, being so lucrative, it is simultaneously very costly to regulate. The sterile injectable drug market is an example of a specific faction that is particularly affected by overwhelming regulation standards and costs. Sterile injectable drugs are often “life-saving drugs” used to treat deadly diseases such as cancer.[7] They are made from living components, which often require special handling and specific conditions in order to ensure that they remain effective.[8] This adds additional costs, and results in regulation that is perhaps “too high to justify the business decision to continue production if a company is faced with the mandate to remodel their facilities in order to comply with the web of FDA regulations governing this product.”[9] The increased spending that this family of drugs requires can deter companies from entering and competing in the market altogether, leading to production halts and reduced access for particularly vulnerable populations that rely on sterile injectables to survive.
In their paper titled “The Role of Government Reimbursement in Drug Shortages”, authors Ali Yurukoglu, Eli Liebman, and David B. Ridley explain how, “In the U.S. a typical generic sterile injectable drug is produced by three to four of the seven big generic injectable manufacturers.”[10] The FDA and the IMS Institute for Healthcare Informatics estimates that the top five manufacturers in this field produce over 80% of the market supply of sterile injectable drugs and in 2010 accounted for 73% of the dollars made in sales.[11] The highly specialized character and relatively low amount of competition within the sterile injectable drug market spurs exorbitant prices, as manufacturing companies can set costs to their advantage. Regardless of cost, sick patients will pay inordinate costs for drugs and healthcare–including hospital stays and visits to the doctor–if it means that it will maintain their quality of life. This perpetuates a market that preys upon the precarious positions of consumers, luring them into paying maximum cost for drugs as highly-differentiated and vital as sterile injectables.
In the high-stakes market for sterile injectables, FDA regulations make drugs even less affordable for patients. In her article titled “Industry Leaders Debate Pros, Cons of Rx Drug Regulation”, Nicole Brown states, “Without FDA regulations, projections show, pharmacy prices would be 85 percent lower.”[12] The costs that accompany increased FDA regulation are often too large for companies in such specialized markets to incur–or for consumers to pay. Therefore, the question becomes: if FDA regulations deter companies from entering the sterile injectable drug market, do these regulations stunt our country’s research and development and the medical advances that we are capable of as a society? Are there life-saving drugs that we are able to produce, but remain inhibited from doing so due to high costs and minimal returns?
Pharmaceutical Drug Regulation as a Form of Structural Violence
If the answers to the above questions are yes—that the costliness of drug regulations is limiting advancement in the pharmaceutical sector—then these regulations can be understood as a form of structural violence. As Nancy Scheper-Hughes understands it, structural violence can be defined as:
…violence that is permissible, even encouraged. It refers to the invisible social machinery of inequality that reproduces social relations of exclusion and marginalization via ideologies, stigmas, and dangerous discourses attendant to race, class, sex, and other individual distinctions.[13]
When regulations deter drug companies from producing drugs that are demanded by a very small, specific subset of the population, they isolate consumers counting on these medications. This marginalizes those who suffer from diseases requiring more costly medications by halting pharmaceutical advances in this domain. Vulnerable populations requiring expensive drugs within restricted markets have few options other than to succumb to paying large sums of money. For those of low socioeconomic status, for whom affording these drugs can be an exorbitant challenge, the structural violence that they face constitutes an inescapable reality.
Paul Farmer, anthropologist and Chair of the Department of Global Health and Social Medicine at Harvard Medical School, explains structural violence in his book Pathologies of Power: Health, Human Rights and the New War on the Poor. Farmer states, “But one alarming feature of structural violence is that bullets are increasingly un-necessary when defenders of social and economic rights are silenced by technocrats who regard themselves as ‘neutral.’”[14] While not everyone is directly impacted by the structural violence that plagues those with medical conditions requiring sterile injectables or other particularly pricey medications, the responsibility to encourage legislation aimed at alleviating the structural violence suffered by these individuals is omnipresent. The argument that remaining silent in a time of crisis is equivalent to taking the side of the oppressor is true particularly in this instance, in which the stakes are tremendous. If we do not take active strides towards decreasing the costs of pharmaceuticals, quality of life and overall societal well-being will suffer. It is in our best interest as a global community to live in a healthier world and foster an environment in which our fellow citizens can be most productive.
Concluding Remarks
While we should accept the necessity of some degree of pharmaceutical drug regulation in order to protect consumers, the current system requires much improvement. An optimal system would make drugs affordable for patients, as well as incentivize manufacturing companies to produce drugs, invest in discovering innovative solutions to rare conditions, and make profits.
Given the number of issues that arise from drug regulation, it is tempting to argue against it altogether. In this model, consumers would be forced to trust drugs produced by private companies without any knowledge of the potential complications that could arise from drug consumption. Companies would be incentivized to innovate and invest in research and development in order to enter into the market, knowing that the faster that they can develop new products, the quicker they are able to brand, market, and sell to consumers seeking cures. However, there would still be little incentive for companies to develop medications for less common diseases if they were already available from another provider. In this model, companies could develop their own standards for testing in order to build consumer trust and establish a reputation of safe production. Nevertheless, this scenario would not encourage a balanced system, and would only “solve” a fraction of the problem by allowing for quicker development and decreased production costs as a result.
An alternative option that has been proposed is that the FDA continue its current practices of regulation, with one caveat:
…that the drugs be made available—if the manufacturer wishes—during the approval process. The FDA could rate or grade drugs and put stern warnings on unapproved drugs and drugs that appear to be riskier. Economists expect that cautious drug companies and patients would simply wait for FDA approval, while some patients would take their chances.[15]
This would lead to a solution that is “pareto optimal, in that everyone is at least as satisfied as under the current system. Cautious patients get the safety of FDA approval while patients who do not want to wait don’t have to.”[16] While this would allow for an ideal system by affording doctors and consumers the option to take risks while simultaneously maintaining regulation for those who value it, this nonetheless retains the economic inefficiency of a slow and daunting drug development process that can span to loom over developers and manufacturers for decades.
There are numerous costs and benefits to the current drug regulatory system in the United States, and it is particularly important that vulnerable populations such as consumers without choice, money, or agency are included in the conversation on regulation to alleviate the structural violence from which they suffer. Addressing the call to action for legislation and regulatory reform is imperative for the proliferation of global health and success of future generations.
References
- U.S. Department of Health and Human Services. “Health, United States, 2016: With Chartbook on Long-Term Trends in Health.” Centers for Disease Control and Prevention, May 2017. https://www.cdc.gov/nchs/data/hus/hus16.pdf#079. ↑
- Burnett, Kathryn S. “White-Bagging vs. Buy-and-Bill: Practical Considerations for Physicians Administering Specialty Pharmaceuticals.” Journal of Health & Life Sciences Law 8, no. 3 (June 6, 2015): 42. ↑
- Carpenter, Daniel. Reputation and Power: Organizational Image and Pharmaceutical Regulation at the FDA. Princeton University Press, 2010. ↑
- Katz, Ariel. “Pharmaceutical Lemons: Innovation and Regulation in the Drug Industry.” Michigan Telecommunications and Technology Law Review 14, no. 1 (January 1, 2007): 1–41. ↑
- Ibid. ↑
- Law, Marc T. “How Do Regulators Regulate? Enforcement of the Pure Food and Drugs Act, 1907-38.” Journal of Law, Economics, & Organization 22, no. 2 (2006): 459–89. ↑
- Roman, Aubrey. “The FDA and the Pharmaceutical Industry: Is Regulation Contributing to Drug Shortage Comments.” Albany Law Review 77 (2013): 539–78. ↑
- Roman, 546. ↑
- Ibid. ↑
- Yurukoglu, Ali, Eli Liebman, and David B. Ridley. “The Role of Government Reimbursement in Drug Shortages.” Stanford University. July 12, 2016. https://web.stanford.edu/~ayurukog/shortages.pdf. ↑
- Ibid. ↑
- Boucher, Nicole. “Industry Leaders Debate Pros, Cons of Rx Drug Regulation.” Brown Daily Herald, October 9, 2009. http://www.browndailyherald.com/2009/10/09/industry-leaders-debate-pros-cons-of-rx-drug-regulation/. ↑
- Scheper-Hughes, Nancy. “Dangerous and Endangered Youth: Social Structures and Determinants of Violence.” Annals of the New York Academy of Sciences 1036 (December 2004): 13. doi:10.1196/annals.1330.002. ↑
- Farmer, Paul. Pathologies of Power: Health, Human Rights, and the New War on the Poor. Berkeley: University of California Press, 2005. ↑
- Hooper, Charles. “Pharmaceuticals: Economics and Regulation.” The Concise Encyclopedia of Economics, 2008. http://www.econlib.org/library/Enc/PharmaceuticalsEconomicsandRegulation.html. ↑
- Ibid. ↑
