Market structure and advertising in the U.S. pharmaceutical industry: some implications for public policy

Distortions in market processes for pharmaceuticals raise the important policy problem of devising measures to improve industry performance. This paper first reviews the basic issues involved in formulating economic policy regarding the pharmaceutical industry. Methods for reducing structural market power and undesirable promotional expenditures are examined, and the impacts of four oft-suggested policy "reforms"--removal of trade names, removal of patents, relaxation of requirements for certification of new drug products, and increased enforcement of antitrust laws--are then analyzed. Finally, problems requiring additional research are identified.