Market Menagerie by Smita Srinivas

Author:Smita Srinivas [Srinivas, Smita]
Language: eng
Format: azw3
Publisher: Stanford University Press
Published: 2012-04-03T16:00:00+00:00

Varieties of Health-Care States

Health-care markets comprise many permutations of the ideal types, depending on which of production, demand, and delivery are being discussed. Although vast differences still abounded in welfare-state institutions, European nations converged considerably, at least in pharmaceutical coverage, procurement, and demand.32 But welfare states and health-care states, although commonly taken together, often have distinct elements. Michael Moran emphasizes that even in the “market” economy of the United States’ liberal regime, mixed-market instruments have always existed, as have state regulations.33

Although welfare-state legislation often molds the pharmaceutical industry, countries differ in the extent to which government legislation and market size are able to accommodate both social protections and industry innovation. The so-called Schumpeterian workfare state allowed nations and firms the ability to mesh the innovativeness of their industrial supply of health technologies with systems of delivery and collective demand. U.S. industrial suppliers and innovation, for example, grew ever stronger, but employment-linked health insurance became a primary means of health coverage, while demand institutions that promoted innovation but reduced costs became increasingly scarce.34

Moreover, legislation with intended welfare goals through price regulation may sometimes pull firms toward imitative but not especially innovative drugs. Modest domestic markets can nevertheless be innovative, as in the Netherlands, Denmark, Sweden, and Switzerland, but it helps to have strong exports. By the late 1970s several OECD countries reined in costs by encouraging or requiring generics and by adopting secondary medicine markets. This, along with advertising and brand-name recognition and encouragement from managed-care firms, made generics attractive. Many firms began to focus on low-cost, profitable margins in technologically mature segments.

Until then, medicine prices had been driven largely by supply and demand and nationally regulated practices of physicians. However, the oil crisis, the economic slowdown, and rising unemployment in both Western Europe and the United States had a deleterious effect on public and private health access; insurance entitlements disappeared or slowed as health costs spiraled upward. Public health care became a rallying cry for both unemployed workers and older citizens whose real purchasing power had either been depleted or significantly reduced. Both governments and insurance firms reined in costs, resulting in profit losses for suppliers.35 In Japan, with the largest per capita spending on medicines, recession forced health reimbursements to drop an average of 40% from 1980 to 1987.36 By the late 1980s private insurance firms, government regulation, and employers brought down costs, often through group rates of health benefits. These forced physicians to select from preapproved safety and efficacy lists of medicines.

Greater complexity was in store for health-care markets. “Managed health care” of the 1990s in the United States, for example, evolved to curtail costs, and supplier firms responded with aggressive marketing and sales. The state broke this impasse with insurance regulation that combined the pressures and interests of several health actors.37 Managed care and pharmacy benefit management firms became institutional customers alongside more traditional customer segments of individuals, physicians, and pharmacies. In Europe, where private insurance was dwarfed by national health insurance systems (which by the 1990s

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