An Information Infrastructure For The Pharmaceutical Market

The primary contribution of Joseph Newhouse's paper is to make the point that it is impossible to devise a drug pricing policy that satisfies either the conditions for economic efficiency or prevailing standards of "fairness." Not specifically mentioned by Newhouse is a rule for the socially efficient outlays on selling and marketing by the pharmaceutical industry. In fact, it is not clear that the current allocation of the industry's revenue dollars to marketing and R&D is efficient from society's point of view. This paper explores this question and proposes an independent, publicly funded information infrastructure to study and disseminate results on pharmaceutical cost-effectiveness.