Book Review

Pharmaceutical Economics and Policy

N Engl J Med 1997; 337:1854December 18, 1997

Article

Pharmaceutical Economics and Policy
By Stuart O. Schweitzer. 246 pp. New York, Oxford University Press, 1997. $39.95. ISBN: 0-19-510524-9

A few years ago, a book on pharmaceutical economics and policy would probably have been greeted with murmurs of polite interest from a few select areas of the health care community and then have been consigned to use as a reference by these sectors. The increasing importance of managed care, concern about the rate of increase in pharmaceutical prices, questions about a lag in the timing of new drug approvals in the United States as compared with Europe, and the increasing globalization of the U.S. economy have all served to focus attention on the pharmaceutical industry and its importance throughout health care. Beyond these issues, concern has been expressed about another type of drug lag; the lack of availability of some drugs in underdeveloped countries and the lack of drug-development activity for diseases that are particularly important in those countries. Dr. Schweitzer, who is professor of health services at the University of California at Los Angeles School of Public Health, has performed a valuable service by writing a broad overview of these topics.

In addition to the introduction, the book has four broad sections, entitled “The Industry,” “The Consumer,” “The Market,” and “Intervention in the Pharmaceutical Market: Public and Private.” The section on the pharmaceutical industry is devoted to a review of research and development and marketing strategies. In the section on the consumer, Schweitzer discusses the components of consumer demand (in the economic sense) for pharmaceuticals and the roles of companies, pharmacies, managed-care systems, and insurance in influencing such demand. In the next section he describes the many factors that determine the domestic and international prices of pharmaceuticals, including some features of the international market for pharmaceuticals. There is also a discussion of the timing of drug approvals in the United States and Europe. In the final section, Schweitzer reviews the effects of regulation and cost containment, including the influence of the patent process on the pharmaceutical industry. This section also covers the possible role of cost-effectiveness, cost–benefit, and utility analyses in the evaluation of drugs and concludes with a look at potential policy changes in these areas and how they might influence the industry.

This book takes an economic approach to many of the topics discussed. According to the author, readers need only minimal exposure to the field; however, those lacking this background may find the early portions of the book somewhat difficult. Explanations of many of the concepts are provided later in the book. In a subsequent edition, the author might consider placing some of this material earlier in the book, which would benefit many readers.

I found the discussions of pricing and marketing pharmaceuticals valuable, as was the discussion of the inverse relation between a nation's regulatory controls and the amount of pharmaceutical research and development occurring there. The chapter on pharmaceutical regulation and cost containment and the roles of the different players in this area was quite interesting. Despite my previous comments, I found the author's economic approach useful in understanding the issues of price and demand. The chapter devoted solely to patents was also most welcome.

The author is obviously quite comfortable with economics, but he is less familiar with the process of drug development and the process of review by the Food and Drug Administration (FDA), and a number of misconceptions or errors have crept into the book. FDA regulations specify a variety of study designs that are acceptable to demonstrate the activity of a drug, and placebos are not necessarily used in the early stages of development, when basic information on safety and pharmacokinetics is being collected. Orphan-drug “marketing exclusivity” applies not to the first approval of a class of drugs but, rather, to a specific drug for a specific indication. In contrast to what is stated, a product manufactured by biotechnologic methods is not automatically reviewed by the Center for Biologics Evaluation and Research at the FDA. I was also surprised that, although there is extensive discussion of the research and development process and its influence on drug pricing, there is little from the industry's perspective regarding the uncertainties of a return on investment early in the development process and the approaches used to address these uncertainties when decisions on project funding are made.

Notwithstanding these criticisms, I found this a very valuable book. It contains current information, delivered in an evenhanded way, on a wide range of topics. It is a useful overview of an important area of health care.

Mark J. Goldberger, M.D., M.P.H.
Food and Drug Administration, Rockville, MD 20850