Game Changer - the game theory podcast
The Price of a Pill: Game Theory and the Pharmaceutical Industry | with Oliver Viehmann
Episode guests
Podcast summary created with Snipd AI
Quick takeaways
- Regulations in the pharmaceutical industry are necessary to protect patients from dangerous products and to manage information asymmetry between companies and consumers.
- Innovative auctions and procurement mechanisms, like China's volume-based procurement program, have significantly reduced drug prices, but present challenges for payers and pharmaceutical companies in terms of balancing competition, physician choice, and fostering innovation.
Deep dives
Regulation in the Pharmaceutical Market: Information Asymmetry and Price Management
The podcast episode explores the highly regulated pharmaceutical market and the reasons behind the extensive regulations. One key reason is the information asymmetry between pharmaceutical manufacturers and patients, where patients lack the expertise to judge the value of medicine. Regulations are in place to prevent the presence of dangerous products and snake oil sellers. Additionally, the episode discusses the need for authorities to regulate or manage pharmaceutical prices due to the same information asymmetry between companies and consumers. This regulation involves two aspects: market authorization regulations and drug pricing negotiations. Market authorization requires companies to demonstrate the efficacy and safety of their products, carrying significant financial risks. Drug pricing negotiations involve country-specific processes to define fair prices, often involving assessment of medical value and innovative procurement methods that leverage competition between manufacturers.
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