The Effect Of Regulation On Pharmaceutical Revenues: Experience In Nineteen Countries

Abstract

This paper describes the pharmaceutical regulatory environment in 19 developed countries from 1992 to 2004 and examines how changes in regulatory policies affect pharmaceutical revenues. Several important findings emerge from our analysis. First, we document a trend towards increasing pharmaceutical regulation over this 13-year period. Second, we find that a majority of regulations reduce pharmaceutical revenues significantly. Third, we find that most countries that adopted new regulations since 1994 already had some regulations in place for controlling costs. We find that such additional regulation had a smaller impact on further controlling costs. However, we find that introducing new regulations in a largely unregulated market, for example the US, could reduce pharmaceutical revenues significantly. Finally, we show that the effects of price controls increase over time.

Market size and innovation: Effects of Medicare Part D on pharmaceutical research and development

“…Several of these countries regulate prescription drug prices, and regulations may change rapidly over time. Thus, given the lower expected profit per consumer and greater uncertainty about future profits and prices, firms’ R&D decisions are likely to be less responsive to a unit change in expected revenues for all these countries combined versus the same unit change in the U.S. market (Sood et al, 2009). Along these lines, elasticity of innovation to global demand might be smaller than the elasticity of innovation to U.S. demand if—as Civan and Maloney (2006) assert—the pharmaceutical industry is only responsive to changes in intensity of U.S. demand.…”

Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices

“…1 In addition, existing pharmaceutical regulations on prices such as price controls and reference pricing reduce revenues to pharmaceutical companies, and there is increasing pressure to reduce prices through regulation in the United States. 2 This confluence of events will mean significant changes in the industry's structure. Further, the squeeze on profits, it is argued, could have adverse impacts by reducing innovation incentives, and thereby could lower worldwide access to novel treatments in the future.…”

Cost-Containment Policies in Public Pharmaceutical Spending in the EU

“…Most of the reforms described above took place in countries which already had regulated markets to a certain degree, such that the subsequent reforms were only incremental. Sood et al (2008) find -by analysing pharmaceutical regulations in 19 developed countries -that incremental or partial reforms have indeed only a minor impact on cost-containment. However, they also find that regulating completely or partially unregulated segments of pharmaceutical markets can lead to considerable long-term savings.…”