Drugs are unlike other consumer goods in that they are crucial to meeting the important objective of improving public health. So they should not be treated in the same way as ordinary commodities. Their development, manufacture, importation, subsequent handling within the distribution chain and use require specialized knowledge and skills. Consequently, they should conform to prescribed standards and their quality should be controlled rigorously.
The sale of drugs in particular illustrates how drugs differ from ordinary commodities. In order for the competitive market process to work, the consumer must be fully informed about the attributes of the commodity being purchased. Thus if a seller knows more about the commodity in question than a buyer, market transaction will be characterized by incomplete or asymmetric information, and will be disadvantageous for buyers.13 This is precisely the situation when drugs are sold, since manufacturers, prescribers and dispensers know more than consumers about the safety, efficacy and quality of drugs they manufacture, prescribe or sell. Clearly, unlike other commodity markets, the drug market should not be allowed to and indeed cannot regulate itself.
Further justification concerning why drug sales must be regulated is given below.
Numerous interested intermediaries
In its simplest, ancient form, the provision of medicines involved only two actors: the healer (who also produced the medicines) and the patient or consumer. Interaction was between the patient and the healer. As a result, the treatment outcome depended largely on the healer’s competence. Today, a number of intermediary or third-party actors, such as researchers, manufacturers, distributors, promoters and medical sales representatives, private insurers and drug dispensers have entered into the transactions between prescriber and patient, and a variety of interactions occurs. These interactions can affect treatment outcomes.
Studies have shown, for example, that the prescribing practices of physicians can be affected negatively by their interactions with pharmaceutical industries or sales representatives, or by the gifts they receive from pharmaceutical companies.14,15,16 Similarly, interaction between researchers and pharmaceutical industries can influence research outcomes negatively.17,18 Drug regulation is required in order to minimize such influence.
Patients and consumers generally do not select their drugs themselves. Rather, drugs are prescribed by a physician or health worker. Physicians and health workers depend largely on the information that the manufacturer or seller provides about its (new) drugs. Yet in most cases, the manufacturer or seller has not supplied them with sufficient information for fully assessing the quality, efficacy and safety of the drugs they prescribe. Moreover, in an unregulated free market, the quality of the information provided by the pharmaceutical supplier can be influenced by profit motives, which can in turn negatively influence the prescribing practices of physicians and health workers. Thus in an unregulated market, exposure to hazardous drugs is potentially greater. Moreover, when consumers themselves select drugs, as in the case of over-the-counter drugs, they may lack not only the information but also the specialized knowledge necessary for making a critical comparison, in terms of safety, efficacy and quality, of the various products available.
In some instances, consumers are led to believe that certain drugs will cure their illness, even though those drugs are of no therapeutic effect or even toxic. In their desire to be cured of their illness consumers may then create demand for such drugs. However, government intervention in the form of regulation and public education can prevent such situations from occurring.
If a physician or health worker acts both as the prescriber and the dispenser or seller, potential conflict of interest can occur between the financial gain to be made from the sale of more drugs and the professional obligation to advise what is best for the patient. Profit margins are a case in point. If profit margins are linked to the cost of the drug rather than to the number of prescriptions filled, dispensers will tend to stock and sell expensive brand preparations.
Additionally, if the prescriber lacks the incentive to minimize treatment costs or to choose what is most cost-effective for the patient, consumption of drugs may be unnecessarily high and resources wasted. This situation can occur in health systems where private insurers or the government cover treatment costs and the patient is insulated from the impacts of price.
Drug testing and outcomes
Drug manufacturers are required to carry out various tests on animals and people to establish the therapeutic benefits and risks of new products. In the unregulated free market, decisions about how much testing to undertake on new products are sometimes influenced by profit incentives. (Limited testing obviously reduces test costs). As a result, drug products, the risks of which are excessive when compared to the benefits obtained, may be introduced to the market. And in some cases, the positive results of pre-marketing safety and efficacy studies have been called into question after the relevant drug has been used by a large number of people over a long period.5
Misuse of drugs and drug shortages
Misuse of drugs and drug shortages can have serious effects on the health of individual patients or consumers, as well as widespread impacts on the health of a country’s entire population. For instance, if an individual misuses an antibiotic, or is unable to complete an antibiotic course due to shortage of supply, microbial resistance to that drug can develop, reducing its value to others, and ultimately putting more lives at risk. Conversely, curing individuals of communicable diseases such as tuberculosis prevents further transmission.
Pharmaceutical products have limited shelf-life even when stored under specified storage conditions. Thus if they are stored under adverse or improper conditions they can deteriorate very rapidly, losing their therapeutic value. Such changes may even result in the formation of toxic substances that can damage the patient’s health or cause death.