Pharmaceuticals as a market for “lemons”: Theory and practice
Introduction
Markets for “lemons,” in which customers fall victim to a product or service with flaws, and sellers profit from not disclosing hidden risks or dangers, are a theoretically rich but unexplored domain for social scientists studying information asymmetry, where sellers know about flaws but buyers do not and can be exploited. Social scientists to date have overlooked the potential of George Akerlof's (Akerlof, 1970) market for “lemons” for sociological interpretation, theoretical development, and empirical research. Asymmetries of information and power may tempt sellers to deceive or manipulate, fostering distrust and distortions. This essay will begin with offering an original, theoretical analysis of Akerlof's original article. It will dispel certain widely held assumptions and myths about markets for lemons and identify a large, unexplored domain for using analytic tools from sociology to understand how stakeholders respond to and address the inherent problems of such markets. The paper will then turn to pharmaceuticals as a complex market that is rife with hidden flaws or “lemons” and examine the strategies used by the major, research-based pharmaceutical firms to construct the evidence about benefits and harms of their leading drug-candidates and to get them approved and used. A final section will describe how this evidence is used to persuade physicians to prescribe new, patent-protected drugs that usually have few or no clinical advantages over existing products but pose substantial risks of harms that patients barely know about. One is left with a greater appreciation of ways a complex lemons market operates that can be applied to other lemons markets.
Section snippets
Reframing Akerlof's market for lemons
Akerlof's theory is in fact a set of related theories which are not tightly connected or explicated. Of greatest relevance is the most common understanding of a market for “lemons,” where the sellers know of hidden flaws, risks, or dangers but make more money by not disclosing them to buyers. Buyer beware. “The presence of people in the market who are willing to offer inferior goods,” Akerlof asserted, “tends to drive the market out of existence – as in the case of our automobile ‘lemons’” (pg
Pharmaceuticals as a market for lemons
From at least the early 19th century, drugs have been a market for lemons, but not one of a spiraling decline in quality ending in collapse. Rather, by fits and starts, laws and institutions have been developed to guard against lemons, promote effective medicines, and protect patients. Most were prompted to action by drug disasters, where scores or hundreds of innocent people were seriously harmed. The US Food and Drug Administration (FDA) haltingly gained more rules and powers to protect
Conclusions
This analysis of pharmaceuticals as a market for lemons has detailed ways in which companies minimize knowledge for physicians, regulators, patients and even themselves about the hidden dangers in new drugs. The resulting body of commercialized medical science is then used to shape both diagnosis and prescribing decisions in a market controlled by clinicians who have monopoly control over deciding what to prescribe and what they tell patients. Clinical guidelines are based on them, developed by
Credit author statement
Donald W Light, conceptualization, research, formal analysis, writing initial draft and revisions. Joel R. Lexchin, review, research, formal analysis, writing revisions.
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