When does the interaction between the pharmaceutical industry, authorities, doctors, pharmacies and patients work?
The pharmaceutical industry, the government, doctors, and pharmacists, as well as patients, all play a crucial role in the medication market. How does the interaction between these different stakeholders affect the system?
8.4
The pharmaceutical market is characterized by strict regulation, high innovation dynamics, and a strong focus on the benefits and costs of medications. Medications provide significant health benefits by enabling the treatment of diseases, alleviating symptoms, and improving quality of life. Their effectiveness is a key factor in therapeutic progress. Accordingly, they are subject to stringent legal requirements to ensure safety, efficacy, and quality. At the same time, the cost of medications plays a crucial role. Research and development of new compounds require substantial investments, often resulting in high prices for new medications. Drug prices, access, and advertising are therefore highly regulated. Alongside strict regulation, there is also intense competition—both in the development of new drugs and therapies and through generics that enter the market once patents for original products expire.
One in every four francs spent on pharmaceuticals
Pharmaceuticals account for about a quarter of the total expenses in basic insurance, although the exact share is unknown. This is because, while pharmaceuticals are used during inpatient hospital treatments, their costs are not reported separately in the statistics. However, when pharmaceuticals are obtained at a pharmacy, doctor's office, or hospital outpatient clinic, the costs are known. In 2022, pharmaceuticals costs amounted to at least CHF 8.4 billion, with the largest share—CHF 4.4 billion—attributable to pharmacies. What stands out in international comparison is that a relatively large portion of pharmaceuticals dispensing occurs directly through doctors. This is due to the fact that some cantons allow “self-dispensing”, meaning physicians can directly provide medications in their practices. We have conducted several studies on this topic, which are explained in greater detail in the articles below.
71 %
931
1/3
From a health economics perspective, the pharmaceutical market is particularly interesting because many decisions are made collectively by various stakeholders. For instance, patients must always consult a doctor to access prescription medications. Which drug they receive depends on the doctor and, in some cases, the pharmacist. Since doctors and pharmacists earn a margin from dispensing medications, they may not always have an incentive to provide the cheapest option. This is especially true when multiple drugs with the same active ingredient are available, such as generics, where financial interests might take precedence. The prescribing behavior of doctors and the dispensing practices of pharmacists, as well as drug prices, directly influence the revenue and profit of pharmaceutical manufacturers. Consequently, the pricing strategies of the industry, when some flexibility exists, depend on the behavior of these other stakeholders. Prices, in turn, impact whether a medication is available in the market. Many diseases currently lack treatments because research and development are simply not profitable. On the other hand, producers may withdraw from a market if prices drop too low after patents expire. The differing interests of stakeholders result in numerous trade-offs regarding innovation, costs, access, and more. Through our research, we aim to better understand these trade-offs, enabling policymakers to make informed decisions.