Implications of Regulation in Health Care

Implications of Regulation in Health Care

Advancements in the pharmaceutical industry have significantly contributed to the evolution of health care. This multifaceted industry is influenced by stringent FDA regulations, requiring extensive research, development, and testing procedures, which ultimately influences expenditures, product prices and profit margins. This paper will attempt to analyze the influence of regulation on the pharmaceutical industry.

Regulation of Pharmaceutical Services

The Food and Drug Administration (FDA) is the agency mandated to promote public health through the regulation of medications, both prescription and over-the-counter. The FDA is responsible for reviewing the entire life cycle of a pharmaceutical i.e. from premarket testing and development to drug approval and post market surveillance followed by potential risk management, to ensure its safety and appropriate use (Seligman, 2008). Comprehensive safety evaluation determines whether pharmaceutical agents meet the FDA requirements for safety and efficacy and are eligible for a new drug application (NDA). Approval of a NDA subsequently leads to the FDA's post marketing drug safety program which is responsible for data collection and assessment related to the occurrence of any adverse events or medication errors, with the role of this process being to detect unexpected adverse events and employ appropriate countermeasures to ensure the well-being of the public (Seligman, 2008). The MedWatch program allows the FDA to accumulate data related to adverse events and side effects as reported by health care professionals and patients. The availability of new information related to a pharmaceutical agent may prompt the FDA to call for additional clinical trials or Phase IV testing, to further evaluate the long term effects of approved drugs. Review of the findings of the Phase IV testing facilitates assessment of frequency and severity of adverse events as well as determination of likely causes (Seligman, 2008). The public health benefits are then weighed against the drug's evolving risk profile to determine the most appropriate course of action, e.g. labeling revisions, revision of drug name and packing, restricted drug distribution or withdrawal of product approval (Seligman, 2008).

The stringent guidelines and practices employed by the FDA ensure the agency's ability to detect and manage any safety issues identified during the drug approval process. The regulation process exists to prevent unsafe drugs from entering the U.S. market and ensure health care professionals, patients and members of the general public have access to accurate product information. Thus the regulation process, made possible through the FDA, is intended to improve overall health care outcomes influenced by pharmaceutical advancements.

Current State of Regulation - Is it appropriate?

The research conducted by this writer has spawned much thought regarding the regulation of the pharmaceutical industry in the United States and has resulted in the opinion that there is the need for adjustments to the current regulatory standards. Many individuals argue that the pharmaceutical industry is driven by unjustified, exorbitant prices. This debate has sparked many responses as well as many reasons and potential remedies for these issues, many of which cite current regulatory and government policies as contributory factors to the high costs associated with pharmaceuticals.

A new drug is estimated to take between 10 - 15 years to progress through research and development (R&D) to the marketing stage; this development cost is estimated to range from 150 million to 1.5 billion U.S. dollars (Getzen, 2010). While the industry is associated with high fixed costs, determined by extremely high development costs, the marginal costs are low allowing for cheap manufacturing of additional units (Frank, 2003). The pharmaceutical industry exemplifies the "information economy" and attractive gross margins made possible through high price setting and the returns facilitated by extensive marketing campaigns are common practice (Getzen, 2010). In fact, the extensive advertising and promotional activities used by these companies have resulted in criticism from some political figures charging inappropriate and wasteful use of resources and prompting the call of regulatory changes.

Drug companies could argue that setting these high prices provides the incentive for extensive investment in the hope of making a new discovery, i.e. the incentive for current R&D is the expected future cash flow created by new product formation (Getzen, 2010). From this perspective, it can be seen that future innovation and the subsequent health care benefits realized from this innovation, rest largely on the incentive of pharmaceutical companies to continue R&D.

This writer is of the opinion that regulatory factors contribute to overall high drug costs, and adjustments to the policies can allow for reduced drug prices while maintaining attractive gross margins to encourage continued pharmaceutical innovation. Many individuals argue that current FDA regulations are too stringent and actually contribute to escalating pharmaceutical prices. FDA practices demand a very high level of product evidence from manufacturers before legal marketing of the drug is granted. The excessive