Regulatory theory: commercially sustainable markets rely upon satisfying the public interest in obtaining credible goods.

Abstract

Regulatory theory is premised on the failure of markets, prompting a focus on regulators and industry from economic perspectives. This article argues that overlooking the public interest in the sustainability of commercial markets risks markets failing completely. This point is exemplified through health care markets - meeting an essential need - and focuses upon innovative medicines as the most desired products in that market. If this seemingly invulnerable market risks failure, there is a pressing need to consider the public interest in sustainable markets within regulatory literature and practice. Innovative medicines are credence goods, meaning that the sustainability of the market fundamentally relies upon the public trusting regulators to vouch for product quality. Yet, quality is being eroded by patent bodies focused on economic benefits from market growth, rather than ensuring innovatory value. Remunerative bodies are not funding medicines relative to market value, and market authorisation bodies are not vouching for robust safety standards or confining market entry to products for 'unmet medical need'. Arguably, this failure to assure quality heightens the risk of the market failing where it cannot be substituted by the reputation or credibility of providers of goods and/or information such as health care professionals/institutions, patient groups or industry.