I would also want to know what economic and marketing theories might account for the pricing strategies used by pharmaceutical companies. For example, are pharmaceutical companies hoping that brand recognition engenders consumer trust to the point that pricing becomes less important?
Comanor, W.S. (1986). The political economy of the pharmaceutical industry. Journal of Economic Literature 24: 1178-1217.
i. What is the goal of this study?
Pharmaceutical prices generally exceed the costs of manufacture (p. 1178). Revenues purportedly are funneled into research and development but, as Comanor notes, the industry had drifted toward monopolistic power by the 1980s. The situation led to governmental intervention and a vetting of the industry and its practices. Comanor investigates a wide range of resources detailing the political economy and marketing strategies of the pharmaceutical industry to elucidate patterns. The research also demonstrates any relationship between public policy or legislation and marketing strategies.
A ii. What is the time period analyzed?
Comanor investigates economic literature spanning several decades, beginning with the 1960s.
A iii. What is/are the data sources?
Data sources derive mainly from economic publications but also from political committee report documents. Established indexes of economic analysis are also a source of data for determining rates of profit and other economic parameters. Essentially, the Comanor research is a meta-analysis.
A iV. What are the main findings?
Pharmaceutical companies engage in spurious marketing, and especially pricing, strategies. Pricing far outweighs costs, and many companies tout moneymaker products...
Until the 1980s, pharmaceutical companies possessed proven monopolistic power, measured on a number of different scales including profit rates.
v. What new information did you learn?
Monopolistic power is not a product of market share alone. The pharmaceutical industry's marketing tactics and pricing strategies strongly suggests a need for third-party intervention and governmental regulation. Competition can also be measured using different standards. Pharmaceutical companies have accounted for high profit margins by claiming that consumers benefit from heavy investment in research and development. However, empirical research shows that revenues are channeled more into marketing than into research.
A vi. What are some suggestions/criticisms you would make to the author?
Comanor offers a rich and probing analysis into the marketing and pricing strategies of the pharmaceutical industry. The author examines a wealth of literature to elucidate long-term patterns and also to show that the industry's approach to marketing is endemic. I appreciate the author's subtle reproach of the ethically questionable marketing practices in question.
A vii. Question you have for the author?
Because the issues raised in the research relate to public relations and politics as much as to marketing and economics, I would ask the author how he felt the best way to approach public policy might be. Issues related to corporate ethics are also salient. For example, the pharmaceutical industry ideally promotes public health and yet hides behind public health as a means to increase profitability. How can watchdog groups ensure greater investment in public welfare?
