The market decides

Is pharma driven by improvements in health or by money?

Pharmaceutical development is based on free-market economics. This significantly shapes the nature of the industry.

For some, the idea that money can be made out of ill health is distasteful. But we live in a free-market economy, and the economic rules that apply to, say, food production also hold for healthcare. By some tokens, it is a highly successful model: we have drugs we can rely on for many conditions, and research is actively being carried out to develop new therapies. But the way the market operates has some unfortunate consequences.

For a start, there’s a strong focus on the diseases of the rich industrialised world. Drug development for poorer nations has to be incentivised, suggesting that pharma’s main concern is profit rather than improvements in health.

Even in high-income countries, the emphasis tends to be on the treatment of chronic diseases – where people have to take medication for long periods. From a financial point of view, a drug that usually needs to be used just once (e.g. an antibiotic or a vaccine) is a less attractive option. Nevertheless, vaccine development in industry is growing.

Another common feature is the appearance of ‘me-too’ drugs – minor variations on existing products. Companies fight each other for a slice of a profitable cake. Development costs will be substantially lower, but the benefits to patients may not be great.

As patents are crucial to the industry, compounds that can’t be protected in this way aren’t attractive for investment – even if they are effective. Why put millions of pounds into developing a drug that your competitor can make as soon as it’s approved?

About this resource

This resource was first published in ‘Drug Development’ in January 2008 and reviewed and updated in August 2014.

Health, infection and disease, Medicine, Biotechnology and engineering
Drug Development
Education levels:
16–19, Continuing professional development