Old Material Flashcards
What are the four types of market failures?
- Public goods
- Externalities
- Natural monopolies
- Information asymmetry
Public Goods
Necessary and beneficial commodities that private entities will not supply because there is no incentive
Examples: orphan drugs; vaccines
Externality
When the production or consumption of a good affects someone who does not fully consent to the effect
Example: indiscriminate use of antibiotics
Monopoly
When the fixed costs of providing a good are high, relative to the variable costs of producing the good
Example: patents and market exclusivity for new drugs
Information Asymmetry
When the consumer is uninformed about the true value of a good
Examples: prescription only drugs; written consumer information for certain drugs
Criminal Actions
Government v. private party
Objectives: deter, punish, rehabilitate
Civil Actions
Private party v. private party
Objectives: compensation to injured party
Administrative Actions
Agency v. private party
Objectives:
Federal Authority
Regulate drug distribution comes primarily from the Interstate Commerce Clause
State Authority
Regulate pharmacy practice and drug distribution comes primarily from the Tenth Amendment and the inherent authority of a state’s police powers
Pure Food and Drug Act (1906)
Prohibited interstate commerce of adulterated (not pure) food and drugs
Food, Drug, and Cosmetic Act (1938)
Scientific proof of safety before a drug could be marketed (sulfanilamide
disaster)
Durham-Humphrey Amendment (1951)
Created 2 classes of products, prescription and OTC, created “Legend Drugs”
Kefauver-Harris Amendment (1962)
Scientific proof of efficacy (effectiveness)
Orphan Drug Act (1983)
Gave economic and tax incentives for pharmaceutical manufacturers to develop drugs for rare disease
Drug Price Competition and Patent Restoration Act (1984)
Created the ANDA for generic drugs (prove bioequivalence) and restored some of patent life for the time a drug sat at the FDA waiting approval