These papers were presented to an Office of Health Economics meeting in London in October 1989. The programme for the meeting was put together by a group of international experts interested in the economics of the pharmaceutical industry, and hence it reflects developments in health economics across Europe.
The objectives of this booklet are twofold. First, to describe in simple terms the state of the art in undertaking economic studies to demonstrate the benefits of new and existing medicines. Second, to remind readers why such analyses are of increasing importance both to individual pharmaceutical companies and to the industry as a whole.
In most countries the resources available for health care are increasingly stretched in the face of the competing demands for their use. Therefore health care policy makers, planners and managers have begun to scrutinize all health care procedures and treatments more closely, in order to ensure that they give good value for money. Medicines have not been exempt from this process and there is increased emphasis on demonstrating additional benefit or social value from new medicines that is commensurate with their costs.
The purpose of this book is to review the current state of health economics and look forward to developments over the next 25 years. The coverage is international, individual countries, areas and the World Health Organization, being considered by world experts. Other topics examined include cost-benefit analysis and issues concerning the pharmaceutical industry. The book should represent a major statement of the field, of interest to economists and health planners.
Half a century ago little attention was paid to the risks associated with medical and surgical treatment. The hazards of sickness itself were so obvious, that the considerable risks of medical intervention were more or less taken for granted.
Expenditure on health care is continuing to rise in all Western countries, both in total and as a percentage of gross national product (Table 1). This has underlined the political importance of demonstrating that this expenditure is giving value for money, both in specific instances and in its totality.
It is widely accepted that resources for the provision of health care are scarce, that is, there are not and never will be enough resources to satisfy either subjective "demands" for health care or externally measured "needs". The use of resources in one health care activity means the opportunity to use those same resources in a competing activity is automatically foregone (the economist 's notion of opportunity cost) (Drummond 1983).
There has been a spectacular explosion of therapeutic progress over the past 35 years. The consequent improvements in public health may seem self-evident. Why, then, is it necessary to employ the disciplines of economics and sociology to try to quantify these benefits? This introduction sets out to answer this question. It also looks at some of the earlier ways in which benefits have been quantified, and it discusses the reasons why new and more sophisticated methods of measurement are needed in the 1980s.