TWO CASES

Two Cases



Regulation of the Drug Industry

Government should not regulate the prescription drugs. Apart from ideological argument, there are issues of pivot importance which will rise if the government starts playing as a regulatory body in the prescription drugs. The industry argues strongly against government participation in many aspects of rationing including pricing. One of the original reasons is that regulatory administration is expected to be an undependable associate even if the whole drug industry were to have the same opinion on price controls and relevant regulations. Analogous statements have been made concerning the government's aptitude to keep long-term obligations (Stiglitz, 1998). This incapacity is conceived to originate from the reality that policy making is vibrant and that there are naturally no institutions that can implement the contracts in which government are involved when it originally put forward a policy (Pierson, 2000). Moreover, in this industry market, when government is both regulator and purchaser (ref. to Medicaid) in an industry low marginal costs and high fixed costs, the assurance problem may be particularly significant to take into consideration. In addition to this, when budget difficulties become severe and policymakers are policing an industry with 75-80 percent gross margins, the appeal to lessen the margin becomes overwhelming. The higher amount of accounting profit offers a rationalization to diminish proceeds to the drug industry. Still when the reasons of Research & development are acknowledged, it will probably be stressed that a 60 % gross margin is doubtlessly sufficient enough. It may be so. Conversely, the costs of being erroneous are enormous.

It is true that making a decision about a drug like Vioxx is often difficult ones which is made by The FDA. It is also undeniable that there have been certain short comings from FDA regarding the drug. Being a regulator, I would definitely ask the question of effectiveness of new drug in treatment. However, there are number of aspects which should also be questioned. Has the studies done by pharmaceutical industries cross verified by other agencies? Are all the side effects in the short run and especially in the long run is determined?

There should be continued evaluation and intermittent reporting on the reliability, safety and effectiveness, of the drug in the post approval period. The drug companies and hospitals should maintained accurate and detailed records of patients that can help to trace the victims in case of disclosure of ...