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Purpose – Pharmaceutical expenditures have an important role in Europe. The attempts to control expenditure have used a wide range of policy measures. We reviewed the main measures adopted by the European Union countries, especially in countries where governments are the largest third-party payers.

Methodology – To complement a literature review on the topic, data was gathered from national reviews of health systems and direct inquiries to several government bodies.

Findings – Almost all countries regulate prices of pharmaceutical products. Popular policy measures include international referencing to set prices (using as benchmark countries that have set lower prices), internal reference pricing systems to promote price competition in domestic markets, and positive lists for reimbursement to promote consumption of generics (including in some cases substitution by pharmacists of drugs prescribed by physicians). Despite the wide range of policy measures, it is not possible to identify a “silver bullet” to control pharmaceutical expenditures. We also identified two main policy challenges: policy coordination among countries within the European Union to maintain incentives for R&D at the global level, and the development of new relationships with the pharmaceutical industry; namely, the so-called risk-sharing agreements between the pharmaceutical industry and governments/regulators (or large third-party payers).

Using the pharmaceutical sector as a microcosm of the health sector, we highlight the most prevalent structural and policy issues that make this sector susceptible to corruption and ways in which these vulnerabilities can be addressed. We conducted a literature review of publications from 2004 to 2015 that included books, peer-reviewed literature, as well as gray literature such as working papers, reports published by international organizations and donor agencies, and newspaper articles discussing this topic. We found that vulnerabilities to corruption in the pharmaceutical sector occur due to a lack of good governance, accountability, transparency, and proper oversight in each of the decision points of the pharmaceutical supply chain. What works best to limit corruption is context specific and linked to the complexity of the sector. At a global level, tackling corruption involves hard and soft international laws and the creation of international standards and guidelines for national governments and the pharmaceutical industry. At a national level, including civil society in decision-making and monitoring is also often cited as a positive mechanism against corruption. Anticorruption measures tend to be specific to the particular “site” of the pharmaceutical system and include improving institutional checks and balances like stronger and better implemented regulations and better oversight and protection for “whistle blowers,” financial incentives to refrain from engaging in corrupt behavior, and increasing the use of technology in processes to minimize human discretion. This chapter was adapted from a discussion piece published by Transparency International UK entitled Corruption in the Pharmaceutical Sector: Diagnosing the Challenges.

The purpose of this investigation is to add to the body of knowledge regarding consumer skepticism toward advertising in general, and toward pharmaceutical advertising in particular. The study was conducted in the U.S. and in Germany. Skepticism toward advertising for both prescription and non-prescription pharmaceuticals was analyzed. Additional variables explored include: health consciousness, product involvement with pharmaceuticals, satisfaction with information in pharmaceutical advertising, and the importance of pharmaceutical advertising as a source of information. Furthermore, differences in the cultural value of uncertainty avoidance between U.S. and German consumers were examined and related to skepticism toward pharmaceutical advertising. Three hundred and forty-one Americans and 447 Germans were surveyed. A significant finding of this research revealed that skepticism toward pharmaceutical advertising is lower than skepticism toward advertising in general. Results also indicated that consumers showed no difference in their level of skepticism toward advertising for prescription versus non-prescription drugs. This is a particularly relevant finding as it relates directly to the ongoing discussion in Europe regarding whether or not to lift the ban on advertising for prescription drugs. Skepticism toward pharmaceutical advertising was found to be significantly negatively related to involvement with pharmaceuticals, to satisfaction with the informational content of the advertisements, to satisfaction with the comprehensibility of the advertisements, and to the importance placed on advertising as a source of health information. Regarding cultural differences, U.S. consumers appear to be less skeptical toward advertising in general, and toward advertising for prescription and non-prescription drugs in particular, than German consumers. This may be due to the lower degree of uncertainty avoidance in the U.S. Differences between the two countries related to the additional variables examined in the study are addressed as well. Implications for consumer protection policies are discussed, and recommendations for advertisers of pharmaceutical products are provided. The authors provide a cultural explanation for differences in the degree of skepticism between U.S. and German audiences.

There is sufficient evidence to prove that the improved health status of a nation’s citizens results in economic growth and development via improved functionality and productivity of labor. It is also commonly accepted that healthcare expenditure significantly influences health status through, for instance, improving life expectancy at birth and reducing morbidity, death, and infant mortality rates. Within healthcare, medicines account for a considerable share of health-related expenditure in both developed and developing countries. Therefore, it seems reasonable to assume that improved access to medicines is likely to contribute not only to the well-being of families and individuals but also to the economic growth and development in all societies. It has been widely advocated that pharmaceutical multinational enterprises (MNEs) can play an important role to address this problem, as they develop and supply a significant proportion of the drugs imported by low- and middle-income countries. This chapter is dedicated to a systematic review of literature in order to identify the strategies implemented by pharmaceutical MNEs to improve access to medicines in the low- and middle-income countries. A total of 76 research articles have been identified, and we have found that the main strategies of pharmaceutical MNEs are related to improving health outcomes through R&D, establishing partnerships for product development, pricing strategies to improve access to medicines, technology transfer, licensing agreements, and nonmarket efforts to improve access to medicines, among other strategies to overcome barriers imposed by intellectual property rights. We have also found that pharmaceutical MNEs’ strategies take place within a complex system and often involve interactions with a wide range of actors, such as international organizations, governments, private not-for-profit sector, universities and research institutes, and generic manufacturers. However, there is still a need for major progress in the field of access to medicines, and pharmaceutical MNEs should be more active in this field in order to avoid potential negative consequences, such as loss of legitimacy and compulsory licensing of their patented medicines.

To investigate the impact of knowledge-intensive FDI in the Chinese pharmaceutical industry, this study analyzes the activity of foreign MNEs operating in this context by exploring their innovative background, the organizational arrangements they use for local knowledge creation and the performance of their local innovative processes. Based on the analysis of the universe of USPTO pharmaceutical patents applied for between 1975 and 2010 and granted to foreign assignees utilizing the work of Chinese inventors, our results show that, while the presence of foreign MNEs in the Chinese pharmaceutical industry entails a strong potential for positive externalities that could enhance the performance of the local innovation system, such externalities do not completely materialize yet, likely because of local actors’ limited absorptive capacity.

Purpose – There is a particular need for health policy evaluations in terms of achievement of goals, which may help inform policy-making not only locally but for the wider international policy community. In this chapter, we review the impact of pharmaceutical regulation and policies in Israel on a range of health system performance goals that, in the pharmaceutical context, are mainly related to ensuring the availability, accessibility and affordability of medicines.

Approach – We assess pharmaceutical policies and their impact, within the Israeli National Health Insurance (NHI) system enacted in 1995, on the degree to which the following main policy goals are being achieved: containment of drug expenditures; sustainability and equity of financing for pharmaceuticals; efficiency of expenditure in the pharmaceutical sector; and availability and accessibility of pharmaceuticals.

Findings – The findings point to a number of accomplishments as well as outstanding challenges. The main accomplishment is successful cost containment of (public) expenditure on medicines. Government price regulation operates as a mechanism responsible for sickness funds’ (SFs) savings, over which the state has no information or monitoring. Although the package of publicly financed drugs is comprehensive, delays in reimbursement decisions and high level of cost sharing mean that medicines have become increasingly unaffordable for many patients, especially for low-income persons with chronic diseases.

Implications – Regulation of the pharmaceutical sector should focus on two aspects: decreasing the information gap between the SFs and the regulator and reforming the cost-sharing policy to increase affordability and equity.

The World Health Organization estimated that in 1999 roughly one-third of the world's population lacked access to essential medicines that would have saved or improved their lives. Our analysis focuses on how pharmaceutical product patents restrict access to essential medicines in developing countries. It is well established that pharmaceutical product patents provide little incentive for pharmaceutical companies to develop new medicines designed to treat diseases prevalent in developing countries or to market in developing countries those patented medicines developed to treat diseases prevalent in developed countries. Economists have developed theoretical models showing that these incentives could be changed if (1) developing countries provided intellectual property protection for new pharmaceutical innovations and (2) an international regulatory framework were established to facilitate pharmaceutical companies setting lower prices in developing countries and higher prices in developed countries for patented medicines. We develop an index of property rights in pharmaceutical innovations covering 129 countries from 1960 to 2005. It shows that in 1960 only a handful of countries provided significant protection for pharmaceutical innovations, but by 2005 over 95 percent of countries in our sample provided significant statutory protections. However, an international framework to allow pharmaceutical companies to price discriminate has not been put in place. We conclude that international price discrimination mechanisms, compulsory patent licenses, and regional patent buyouts are not viable mechanisms for providing access to essential medicines to patients in developing countries. Global patent buyouts are more likely to achieve this goal, as they are not founded on an impractical separation of pharmaceutical markets in developing and developed countries and they provide critical incentives to develop new essential medicines.

Purpose – This chapter explores the pharmaceutical industry's strategic utilization of empowerment discourse in two realms: direct-to-consumer advertising (DTCA) and clinical drug development.

Methodology – It draws upon two research projects that examine the role of the pharmaceutical industry in the political economy of healthcare in the United States: Ronald's policy analysis and participant observation of DTCA policy hearings and Fisher's participant observation and interviewing of the clinical trials industry.

Findings – Empowerment rhetoric is mobilized by the pharmaceutical industry to create specific expectations about patient-consumer behavior, particularly the responsibilities associated with the consumption of drugs.

Research implications – The social and economic implications of DTCA and drug trials must be understood within their broader historical and contemporary contexts of health advocacy, consumerism, and medical neoliberalism.

Practical implications – The chapter offers alternative constructions of healthcare subjects and pharmaceutical practices that can mitigate the power of the pharmaceutical industry and bring about better pharmaceutical governance.

Originality/value of chapter – By analyzing findings from two empirical projects, this chapter is able to shed light on trends in the pharmaceutical industry's discourse about empowerment and consumption from the clinical testing to marketing of new drugs.

The Indian pharmaceutical industry accounts for 8% of global production and exports medicines to over 200 countries. Multinational enterprises (MNEs) enter the Indian market either directly through the establishment of subsidiaries or indirectly through licensing arrangements. However, evidence on MNE’s contribution toward development in India in terms of capability enhancement and linkages or through other spillover effects is limited. The purpose of this research was to generate evidence on (a) contribution of MNEs in the pharmaceutical market in India, (b) nature and impact of foreign direct investment (FDI) inflows in the Indian pharmaceutical sector, (c) contribution of MNEs in R&D and innovation in India, and (d) MNE’s contribution toward introducing new chemical entities (NCEs) and new biological entities (NBEs) in India through a mixed method research design. We conducted an in-depth quantitative analysis on multiple data sets and qualitative interviews of various stakeholders to generate a holistic understanding on the aforementioned research objectives. Our findings suggest that from the perspective of capability enhancement and linkages, the contribution of pharmaceutical MNEs in India is limited. We observed that majority of FDI investments are brownfield against desired greenfield investments. In addition, MNEs are investing far less of profit before tax (PBT) compared with Indian firms on research and development. However, MNEs are contributing significantly toward access to certain pharmaceutical segments like vaccines, hormones, and parenterals, which require sophisticated production facilities, advanced technology, and intellectual capital. Further, MNEs role in innovation and introduction of new medicines (new molecular entity [NME] and NBE New Chemical and Biological Entities (NCEs and NBEs)) in India is significant. We propose that creating a conducive policy environment and predictable regulatory environment can facilitate capability enhancement and linkages through MNEs. Some of the potential policy instruments include appropriate implementation of FDI policy and Intellectual Property Rights (IPR) policy to balance trade and public health.

Purpose – The cost of new drug development is increasing every year. Pharmaceutical companies use R&D joint ventures, mergers, and outsource different stages of pharmaceutical R&D activities for a faster and cost minimizing method of innovation. Pharmaceutical companies outsource R&D activities to independent small biotech or pharmaceutical companies that specialize in different stages of pharmaceutical R&D. This chapter examines the determinants of the payment structure of research contracts between large bio/pharmaceutical companies and specialized research firms.

Methods – Determinants of R&D contracts are analyzed using detailed R&D contract data between bio/pharmaceutical companies and independent research firms for 10 years. A multinomial logit model is used in order to understand the determinants of three different types of contracts; royalty contracts, fixed payment contracts, and the mixed contracts.

Findings – Under uncertainty, the likelihood of a royalty contract rises for the early stages of the research and with the patent stock of the research firm. It is more likely to observe both royalty and fixed payment if the pharmaceutical client has past contracts with the same research firm. The results also suggest that if Food and Drug Administration (FDA) is more stringent in any disease area in reviewing the new drug application, then the likelihood of signing pure royalty contract decreases.

Implications – Understanding the nature of R&D contracts and the effects of FDA's behavior on the pharmaceutical R&D contract is important because these contracts not only affect the cost of new drug invention but also the quality and the rate of invention.

Value – Results are useful for both the pharmaceutical companies and the economic/business researchers.