Drug Pricing circa 1990: Mapping the Literature

This blog is an early-morning project for me—a time to think and learn about whatever I want, purely for the pleasure of doing so. That means reading as well as writing. But I also know that it’s easy for reading to overtake writing, so I’m trying to spend as much time on the latter as I do on the former.

As I’ve already said, though, this is all very new to me. It doesn’t always feel like I’m ready to write. And it may mean that sometimes this is more like notetaking than well-assembled argument or reflection. So be it.

The next task I’ve set for myself is to learn something about how drug companies were making pricing decisions circa 1990. I started by looking for pharma trade publications of the era, on the theory that the most useful orienting point would be news-type coverage, rather than scholarship.

Identifying those has not been as quick as I expected, though. (If a reader out there knows what I should be looking at, please feel free to drop it in the comments.) So I’ve ended up in scholarship anyway.

So far, what I’m seeing is circling around two main academic spaces. The smaller cluster is work in STS/history of science: Jeremy Green’s work on the history of pharmaceuticals, Dominique Tobbell on the drug industry in the Cold War decades, The Pharmaceutical Studies Reader. Of these, Tobbell’s book appears most focused on pricing, though it also seems to center on the 1950s and 60s. (I will look at it more closely.)

The other, more sizable cluster centers in industrial organization economics. This was unexpected to me (having spent a fair bit of time reading in this area), though it makes complete sense. When I started searching for work on drug pricing actually published around 1990, the most promising pieces included a 1986 JEL by William Comanor on the political economy of the pharmaceutical industry, a 1993 JEP by F. M. Scherer on pricing in pharma, and a 1995 book by Alfonso Gambardella on science and innovation in the industry.

Again, I haven’t really read these yet, but will review more closely. One thing that is worth a mention, though, given my interests outside of this exploration, is that two of the I/O folks cited above (Comanor and Scherer) also pop up in my book on the influence of economics on policy—in the context of antitrust policy.

If I’m remembering correctly, Comanor served as the first Special Economic Assistant to the Assistant Attorney General for Antitrust in 1965, when Don Turner became the first economist appointed AAG. This was a moment when economics was just beginning to gain influence in antitrust policy. Scherer led the FTC’s Bureau of Economics in the mid-1970s, as well as writing the most popular I/O textbook of the era. I was not really expecting this to loop back so quickly.

Beyond those two clusters of work, I’m also hitting a clump of publications on value-based pricing from around 2005 in outlets like Health Affairs, with authors coming from more of a business/strategy space than health economics. This is presumably when the idea was taking off, and Michael Porter’s Redefining Health Care: Creating Value-based Competition on Results is one landmark here. While I’m not sure this cluster of work will tell me much directly about the state of pricing circa 1990, it is obviously relevant to the broader story I’m trying to piece together here, and may be useful for finding citations to follow.

I think my next step is reviewing the Tobbell book, and the JEL and JEP. Then we’ll see whether it makes sense to jump forward to the VBP literature circa 2005, to start reading trade publications or other news coverage from the 1990s, or to take some other direction entirely. Either way, it’s all fascinating so far.

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