Promotion, Prices and Profits

An unusual degree of control is exercised by governments on the pricing and profitability of the pharmaceutical industry in the two countries under consideration. In Japan drug prices are controlled; in the UK government stipulates permitted profit margins on domestic sales. There is no other industrial sector where the two governments play such a central role in this key area of industrial control and management. Both states are able to exercise a direct influence on the profitability of the industry as a whole and for this reason the conflict between the ministries’ dual role as industry promoters and custodians of the health service is most obvious. This chapter describes how the two ways of controlling prices have developed. Both have their origins in the 1950s and have evolved through the 1960s and 1970s alongside the growth of their respective health care systems. The 1980s, however, were a period of crisis in which the government-industry relationship came under great strain as government tried to curtail the rising cost of health care provision through policies designed to reduce the consumption and cost of medicine. In the 1990s the problems remain unresolved. Although an accommodation between the ministries and the drug manufacturers is in the process of emerging, government continues to seek further limitation on the cost of medicine in the health care system.