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Self-Regulation in the US Pharmaceutical Market By Self-Regulation in the US Pharmaceutical Market by Raymond J. March B.S. A Dissertation In AGRICULTURAL & APPLIED ECONOMICS Submitted to the Graduate Faculty of Texas Tech University in Partial Fulfillment of the Requirements for the Degree of DOCTOR OF PHILOSOPHY Adam G. Martin Co-Chair of Committee Conrad P. Lyford Co-Chair of Committee Eduardo Segarra Gilbert Berdine Mark Sheridan Dean of the Graduate School May 2017 Copyright 2017, Raymond J. March Raymond J. March, Texas Tech University, May 2017 Acknowledgements Writing a dissertation on self-regulation in the market for pharmaceuticals has been an eye-opening, challenging, and very fruitful experience in my development as an applied economist. One thing this work has not been, however, is a solo effort. I have received support, criticism, inspiration, and guidance from countless individuals while pursuing this project. Let this be my attempt to acknowledge as many of them as possible. I have to begin by thanking my parents whose love and support provided me an environment to think independently and develop an interest in the workings of the medical industry from a young age. I will always be grateful for the efforts of my undergraduate professors to instill a conviction for using the economic way of thinking to understand the pressing problems of the world around me. Thank you Carrie Kerekes, Brad Hobbs, Nikolai Wenzel, and Dean Stansel for the inspiration, encouragement, and for listening. The Free Market Institute, in addition to funding my graduate studies, provided an incredible intellectual environment. I owe a tremendous thank you to Ben Powell who took a chance on me by offering me a fellowship. Adam Martin always provided much needed feedback and guidance. I could not ask for a better mentor. I am also thankful for all the efforts of Andy Young, Ed Stringham, Robert Murphy, Alex Salter, and Michael Giberson. Jake Syma’s help finding obscure physician data was indispensable. Audrey Reford, Glenn Furton, Edwar Escalante, and Gonzalo Macera never failed to provide assistance and feedback when asked (and sometimes when they weren’t asked). A special thanks, however, is necessary for Charles Long for all he has i Raymond J. March, Texas Tech University, May 2017 done and continues to do for me and the Free Market Institute. The Department of Agricultural and Applied Economics was very supportive of my research efforts. Conrad Lyford and Eduardo Segarra were indispensible in helping me develop my research agenda. As a physician, Gilbert Berdine provided incredibly helpful feedback and insight an economist would not consider. Additional financial and creative support was provided by the Institute for Humane Studies and the Mercatus Center at George Mason University. My experiences with these organizations have been invaluable. There are countless others which deserve a thank you for their encouragement and support. Among them are Dagan Mayfield and Ronnie Rowe, Mark Gring for his academia-guiding advice, Tanner Young for his friendship and insight, and Brittany Blanchard for keeping me from going insane during the process. The rest will have to go unmentioned, but not unappreciated. Lastly, and most importantly, this project would not have been possible without the love, support, and keen eye for bad grammar of my wife Amy. ii Raymond J. March, Texas Tech University, May 2017 Table of Contents Acknowledgments ................................................................................................................... i Table of Contents .................................................................................................................. iii Abstract ................................................................................................................................... v List of Tables ........................................................................................................................ vii List of Figures ...................................................................................................................... viii 1. Introdcution ........................................................................................................................ 1 2. Entrepreneurship in Off-label Drug Prescription: Just what the Doctor Ordered! .......................................................................................................................... 6 2.1. Introduction ..................................................................................................................... 6 2.2. Off-label Prescriptions, Entrepreneurship, and the Market Process ............................... 8 2.3. Aspirin and Cardiovascular Wellbeing ......................................................................... 12 2.4. Sexual-pharmacology and Viagra ................................................................................. 14 2.5. Minoxidil’s “Harmless Side Effect" ............................................................................. 17 2.6. Conclusion .................................................................................................................... 20 3. Skin in the Game: Comparing the Public and Private Regulation of Isotretinoin................................................................................................................... 24 3.1. Introduction .................................................................................................................. 24 3.2. The Economics of Risk-Management Programs ......................................................... 28 3.3. Market Failure and Government Failure in Risk-Management ................................... 30 3.4. Evaluating the Stringency of Risk-Management Programs ......................................... 33 3.4.1. Stringency of the Accutane Pregnancy Prevention Program .......................... 33 3.4.2. Stringency of the System to Manage Accutane Related Terotogencity ......... 34 3.4.3. Stringency of iPLEDGE ................................................................................. 35 3.5. Evaluation of the Effectiveness of the Risk-Management Programs ......................... 38 3.5.1. Effectivness of the Accutane Pregnancy Prevention Program ....................... 39 3.5.2. Effectivness of the System to Manage Accutane Related Teratogenicity ...... 42 3.5.3. Effectivness of iPLEDGE ............................................................................... 44 3.6. Coclusion ................................................................................................................... 50 4. Pharmaceutical Company Payments and Physician Concentration: An Empirical Analysis ...................................................................................................................... 54 4.1. Introduction ............................................................................................................... 54 4.2. Rent-Seeking in the Physician and Pharmaceutical Company Relationships .......... 57 4.2.1 Difficulties Differentiating Rent-seeking and Productive Payments .............. 62 4.3. Data ........................................................................................................................... 63 4.4. Empirical Approach .................................................................................................. 67 iii Raymond J. March, Texas Tech University, May 2017 4.5. Empirical Results ...................................................................................................... 74 4.5.1. Rent-Seeking and Additional Specifications ................................................. 81 4.6. Conclusion ................................................................................................................ 83 5. Conclusion ........................................................................................................................ 86 Bibliography ......................................................................................................................... 90 Appendix ............................................................................................................................. 106 iv Raymond J. March, Texas Tech University, May 2017 Abstract Analysis of healthcare markets, including pharmaceutical markets, from an economics framework frequently engages in efforts to modify governmental regulatory efforts to reach efficient outcomes. Often, the complexity and rapidly changing pharmaceutical market outpaces the regulatory body provided by and state level governments. These dynamics leave portions of the regulatory efforts to produce and deliver pharmaceutical products unexamined. This dissertation redirects the attention to efforts within the pharmaceutical market to provide effective self- regulation. It also compares the relative effectiveness of self-regulation efforts to public regulatory efforts in terms of their abilities to obtain sought health outcomes. The findings in each essay conclude self-regulatory frequently attain sought outcomes more effectively than public alternatives. Essay 1 finds physicians and pharmaceutical companies working as entrepreneurial actors were able to better serve patients by finding effective alternative uses of these drugs. I examine off-label drug prescription from an entrepreneurial framework by examining the development processes of aspirin, Viagra, and minoxidil. In each case, research and treatment conclusions were recognized by the medical
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