Pharmaceuticals: A market for producing 'lemons' and serious harm

Incentives and protections for industry encourage development of many drugs with few new benefits over existing pharmaceuticals, but with risk of serious harm to users

ATLANTA — The pharmaceutical industry is a "market for lemons," a market in which the seller knows much more than the buyer about the product and can profit from selling products less effective and less safe than consumers are led to believe, according to an analysis that will be presented at the 105th Annual Meeting of the American Sociological Association.

"Sometimes drug companies hide or downplay information about serious side effects of new drugs and overstate the drugs' benefits," said Donald Light, the sociologist who authored the study and who is a professor of comparative health policy at the University of Medicine and Dentistry of New Jersey. "Then, they spend two to three times more on marketing than on research to persuade doctors to prescribe these new drugs. Doctors may get misleading information and then misinform patients about the risks of a new drug. It's really a two-tier market for lemons."

Three reasons why the pharmaceutical market produces "lemons" are: Having companies in charge of testing new drugs, providing firewalls of legal protection behind which information about harms or effectiveness can be hidden, and the relatively low bar set for drug efficacy in order for a new drug to be approved, Light said.