The drugs industry in Chile

Getting the treatment

Jan 16th 2014, 16:41 by G.L. | SANTIAGO

ASk Lhe average Chllean whaL Lhey Lhlnk of Lhelr local pharmacles and Lhey're llkely Lo splL
blood. lew lndusLrles have been qulLe so dlscredlLed ln Lhe eyes of Lhe publlc ln recenL
years. ln 2012 Lhe counLry's Lhree blg pharmacy chalns, Cruz verde, Salcobrand and
Ahumada, were found gullLy of flxlng Lhe prlces of over 200 drugs, lncludlng LreaLmenLs
for such serlous dlseases as epllepsy and dlabeLes.
CLher problems abound ln Chlle's pharmaceuLlcals markeL. A cosy sysLem of perks and
commlsslons lends lLself Lo abuse. SLorles are rlfe of laboraLorles offerlng docLors
lncenLlves llke holldays for agreelng Lo prescrlbe Lhelr drugs. ln some hlgh-sLreeL
pharmacles, sLaff rely on commlsslons for 60 of Lhelr pay, encouraglng Lhem Lo promoLe
expenslve brands over cheaper ones.
lor flve years a blll has been before parllamenL Lo llberallse Lhe secLor. Cn !anuary 16Lh
resldenL SebasLln lnera gave lL hls flnal approval. lrom now on Chlle's pharmacles wlll
be obllged Lo sLock baslc drugs llke asplrln on shelves raLher Lhan sLashlng Lhem behlnd
Lhe counLer. ln sparsely populaLed communlLles wlLh no pharmacles, oLher reLall ouLleLs
wlll be allowed Lo sell drugs for Lhe flrsL Llme, loosenlng Lhe grlp of Lhe blg Lhree chalns.
Such reforms are parLlcularly welcome ln Chlle, whlch ls home Lo Lhe lowesL number of
pharmacles per person ln LaLln Amerlca. Accordlng Lo lMS PealLh, a consulLancy, Lhere are
10.6 sLores here for every 100,000 lnhablLanLs. ln ArgenLlna Lhere are 32.2, ln 8razll 30.1,
Lhe reglonal average ls 29. More Lhan 1m Chlleans (ouL of a populaLlon of 17m) llve ln
munlclpallLles wlLhouL a slngle pharmacy.
1he governmenL says Lhe law wlll make drugs more affordable. uocLors wlll be obllged Lo
suggesL cheaper equlvalenLs Lo brand-name drugs, and pharmacles wlll be obllged Lo sLock
Lhese generlc medlclnes. !alme Manallch, Lhe healLh mlnlsLer, says Lhls wlll brlng down Lhe
cosL of LreaLmenL for chronlc dlseases llke dlabeLes by around 30. harmacles wlll also
be forced Lo sell pllls lndlvldually. lf you need slx LableLs Lo LreaL an lllness, you'll be able Lo
buy LhaL many raLher Lhan a box of 20.
1he law ls one of Mr lnera's flnal reforms before he sLeps down ln March. lor seelng lL
Lhrough Lo lLs concluslon, desplLe heavy lndusLry lobbylng, he and Mr Manallch deserve a
healLhy dose of pralse.

The Economics of Randomized
Experiments
By CASEY B. MULLIGAN
!"#$% '( )*++,-". ,# ". $/0.01,/# 2304$##03 "5 56$ 7.,8$3#,5% 04 !6,/"-0( 9$ ,# 56$ "*5603
04 :;6$ <$=,#53,>*5,0. <$/$##,0.? 90@ A">03 )"3B$5 C,#5035,0.# !0.53"/5$= 56$
D/0.01%(E

l earn more and have more schoollng Lhan my daughLer, who has no schoollng and no
earnlngs. 8uL no one would conclude from LhaL alone LhaL my schoollng ls Lhe reason why
l earn more Lhan she does.
lL's challenglng Lo measure causal effecLs when many oLher varlables are aL work. ?eL
randomlzed fleld experlmenLs are ln vogue among academlcs ln soclal sclence and
medlclne, even Lhough randomlzaLlon ls ofLen Llmes nelLher Lhe mosL economlcal nor Lhe
mosL eLhlcal way Lo learn how Lhe world works.
An acLlve markeL ln experlmenLal sLudy parLlclpaLlon would boLh reveal some of Lhese
weaknesses and lmprove Lhe quallLy of Lhe research.
Answers Lo causal quesLlons are a way Lo a beLLer llfe. uoes more schoollng lncrease
earnlngs? uoes obeslLy shorLen llfe spans? uoes vlLamln C help prevenL colds?
A fleld sLudy, as opposed Lo a laboraLory sLudy, looks aL people ln Lhelr naLural seLLlng
dolng Lhlngs LhaL Lhey normally do and care abouL. A randomlzed fleld experlmenL Lakes
Lhe people ln Lhe naLural seLLlng and randomly deLermlnes - wlLh a coln fllp, dlce role or
compuLer-generaLed random number - whlch sLudy parLlclpanLs recelve a LreaLmenL and
whlch do noL.
An alLernaLlve approach ls Lo randomly asslgn sLudy parLlclpanLs Lo LreaLmenL and conLrol
groups. 1he LreaLmenL group would be senL Lo exLra schoollng, Lhe conLrol group would
be prohlblLed from aLLendlng exLra school. AfLer Lhe LreaLmenL group compleLes lLs
schoollng, lLs earnlngs could be measured and compared wlLh Lhe earnlngs of conLrol
group, Lhe measured dlfference mlghL perhaps be lnLerpreLed as Lhe causal effecL of
schoollng on earnlngs.
1hese days many academlcs vlew Lhe random asslgnmenL approach as Lhe gold sLandard
for measurlng causal effecLs. urugs are LesLed Lhls way under Lhe supervlslon of Lhe lood
and urug AdmlnlsLraLlon, wlLh some paLlenLs randomly chosen Lo recelve a drug and
oLhers randomly glven a placebo (LhaL ls, a fake drug LhaL ls known Lo be of no help). Labor
economlsLs eagerly look for opporLunlLles Lo randomly asslgn varlous labor markeL
condlLlons (e.g., access Lo healLh lnsurance).
erhaps mosL famously, developmenL economlsLs - randomlsLas as rof. Angus ueaLon
calls Lhem - have randomly asslgned economlc asslsLance Lo poor vlllages ln order Lo
measure Lhe raLes of reLurn on LhaL asslsLance. rof. !effrey Sachs's Mlllennlum vlllages
ro[ecL, an amblLlous efforL Lo help Afrlcan vlllages escape poverLy, has been crlLlclzed for,
among oLher Lhlngs, falllng Lo randomly asslgn lLs LreaLmenLs.
8uL rofessor Sachs dldn'L accldenLally forgeL Lo randomlze hls asslsLance. Pe Lhlnks LhaL
lL's wrong Lo wlLhhold from poor people asslsLance LhaL he's confldenL can help. 1he
paLlenLs who geL placebos ln randomlzed l.u.A. Lrlals would probably agree.
1he problems wlLh randomlzed Lrlals cannoL be dlsmlssed as mere phllosophlcal
challenges, because people reacL Lo Lhe poor LreaLmenL Lhey geL from experlmenLers.
Why should a paLlenL agree Lo leL a dlce or random number generaLor declde hls faLe?
8y lnslsLlng on randomlzaLlon, experlmenLers have Lroubles recrulLlng sLudy parLlclpanLs,
and Lhelr relucLance Lo Lake parL prevenLs us from learnlng as much as we could abouL
new LreaLmenLs (l owe Lhls polnL Lo my colleagues 1omas hlllpson and Cary 8ecker).
Cne approach Lo Lhls problem ls Lo prevenL parLlclpanLs from knowlng LhaL Lhey are
parLlclpaLlng ln experlmenLs or LhaL researchers are lnLroduclng randomness lnLo Lhelr
envlronmenL, as naLural or unframed" fleld experlmenLs do (see Lhls paper by Cmar Al-
ubaydll and !ohn LlsL on Lhe dlfferenL klnds of experlmenLs ln economlcs). rofessor
Sachs's approach ls Lo economlze on Lhe randomness.
8andomlzaLlon ls noL a necessarlly even Lhe besL way Lo advance sclence. More Lhan a few
sLaLlsLlclans suggesL LhaL sLudy samples should be chosen more dellberaLely, and less
randomly (see 1he unprlnclpled 8andomlzaLlon rlnclple ln Lconomlcs and Medlclne" by
Lhe economeLrlclans SLephen 1. Zlllak and Ldward 1eaLher-osadas).
8andomlzaLlon should noL be a goal ln and of lLself, buL raLher one Lool among many for
learnlng abouL how Lhe world works ln a way LhaL has less cosLs and more beneflLs.
1he former chlef economlsL aL Lhe l.u.A., rofessor hlllpson has recommended LhaL
people parLlclpaLlng ln new drug Lrlals be compensaLed for Lhelr parLlclpaLlon. 1haL
pracLlce mlghL appear Lo make drug Lrlals more expenslve, buL an acLlve markeL for sLudy
parLlclpanLs would help us quanLlfy some of Lhe cosLs of randomlzaLlon and lncrease Lhe
knowledge generaLed by each sLudy.
lf, for example, cllnlcal Lrlal parLlclpanLs really dlsllke Lhe posslblllLy LhaL Lhey would geL a
placebo lnsLead of Lhe real Lhlng, Lhey would have Lo be pald more for sLudles LhaL glve
ouL loLs of placebo. lf rofessor Zlllak and oLhers have exaggeraLed Lhe cosLs Lo
parLlclpanLs of randomlzaLlon, Lhen sLudles uslng randomlzaLlon would noL have Lo pay
much exLra for parLlclpanLs.
As lL sLands, mosL federally funded randomlzed Lrlals do noL pay parLlclpanLs for Lhelr Llme
and rlsk-Laklng. 8uL lf experlmenLers had Lo pay for Lhe cosLs Lhey lmpose on parLlclpanLs,
Lhey mlghL be lnduced Lo make causal lnferences wlLh more Lhlnklng and less dlce rolllng.
How to Be a Better Valentine, Through Economics
By PAUL OYER

F"*+ G%$3 ,# " 2304$##03 04 $/0.01,/# "# H5".403= 7.,8$3#,5%I# J3"=*"5$ H/600+ 04
'*#,.$## ".= 56$ "*5603 04 :D8$3%56,.- K D8$3 L$$=$= 50 M.0@ N>0*5 D/0.01,/# K
A$"3.$= O301 G.+,.$ C"5,.-(E

When mosL people Lhlnk of Lhe economlcs of valenLlne's uay, Lhey Lhlnk of Lhe large
amounLs of money people spend ($130 per person, on average).
8uL economlcs can also Lell us how Lo make valenLlne's uay speclal for our slgnlflcanL
oLhers. We economlsLs may have Laken all Lhe fun ouL of ChrlsLmas, buL l Lhlnk we can
make valenLlne's uay more successful. Pere's how. llrsL, flgure ouL how Lo slgnal Lo your
maLe LhaL you !"#$$% care abouL hlm or her. Second, lf you wanL Lo glve your maLe a greaL
valenLlne's presenL, spend money on %'(!)"$*. llnally, one greaL glfL ls Lo sLop hoplng for
perfecLlon ln your maLe and, ln Lhe words of SLephen SLllls, love Lhe one you're wlLh."
!"# %&' (")*+, -./0 ,.12
Slgnallng" ln economlcs means flgurlng ouL a way Lo show anoLher parLy LhaL you really
mean whaL you say. ln many cases, Lhe besL way Lo slgnal ls Lo make a wasLeful
lnvesLmenL. 1hls shows you are wllllng Lo spend a loL Lo demonsLraLe your credlblllLy, and
lL separaLes you from Lhose who wlll noL expend LhaL cosL. lor example, slgnallng ls
valuable ln Lhe educaLlon world, where an early-declslon appllcaLlon shows a college LhaL
a sLudenL ls parLlcularly aLLracLed Lo LhaL school. Accordlng Lo some analysLs, a buslness
can also make good use of slgnals by underprlclng lLs sLock when lL goes publlc Lo show
LhaL lL ls a good lnvesLmenL.
So whaL does Lhls have Lo do wlLh valenLlne's uay? SLarL by asklng yourself, WhaL do l
wanL my parLner Lo Lhlnk upon recelvlng my valenLlne's presenL?"
Suppose you buy your slgnlflcanL oLher a dozen red roses or a box of chocolaLes. She ls
llkely Lo Lhlnk, All rlghL, he cares abouL me enough Lo buy Lhe obvlous presenL." SlxLy-four
percenL of men buy flowers on valenLlne's uay, so glvlng flowers slgnals LhaL you are llke
Lwo-Lhlrds of men. 1hls ls roughly Lhe equlvalenL of wrlLlng hb" on your maLe's lacebook
wall on her blrLhday: lL shows LhaL you remember, and LhaL you are wllllng Lo spend
approxlmaLely seven seconds conveylng LhaL facL.
So how do you say Poney, l really care abouL you, and you are very speclal Lo me"? uL
your resources where your mouLh ls. ?ou don'L have Lo spend a loL of money, buL Lo
credlbly slgnal you really care, do someLhlng personal. Cook someLhlng she really loves,
Lake her Lo see a movle you know she wlll love and LhaL you wlll haLe (posslbly someLhlng
sLarrlng Sarah !esslca arker), or do some unpleasanL chores around Lhe house LhaL she
has wanLed done for a long Llme. 1hese gesLures show LhaL you really do care for her, and
Lhey can separaLe you from oLher guys who care abouL Lhelr maLes, buL noL +,#+ much.
!"# %3' 4+52 -./0 #+06*20 7+##- 8- 9#2*:"*) .* -./092,;
Cnce you've flgured ouL a creaLlve way Lo credlbly slgnal your affecLlon, lL's Llme Lo
expend some resources on yourself. SLudles show qulLe clearly (Lhough you don'L really
need a sLudy Lo back Lhls up) LhaL people are more aLLracLed Lo parLners and poLenLlal
parLners who have cerLaln deslrable characLerlsLlcs. lor example, one sLudy of an onllne
daLlng slLe found LhaL a man who makes $230,000 per year, holdlng oLher Lhlngs equal, ls
conLacLed Lwo and a half Llmes as ofLen as a man who makes under $30,000. Men, on Lhe
oLher hand, Lend Lo be more focused on women's looks. Accordlng Lo an analysls of lLs
own users, Lhe daLlng slLe CkCupld found a hoL woman recelves roughly !" Lhe messages
an average-looklng woman geLs."
?ou have Lo Lallor Lhls Lo Lhe LasLes of your parLner, of course. noL all men care so much
abouL looks (C.k., maybe Lhey do) and noL all women care so much abouL money. Some
people appreclaLe educaLlon, a LasLe for cerLaln books, or cooklng ablllLy, for example. 8uL
leL's say you are a Lyplcal man who could make your parLner happler lf you lncrease your
lncome. Pow should you do lL?
Labor economlsLs have shown LhaL more Lhan anyLhlng else you can conLrol, educaLlon
lncreases lncome. An addlLlonal year of educaLlon, all else equal, leads Lo abouL 8 percenL
hlgher lncome every year for Lhe resL of your worklng llfe. So, lf you really wanL Lo make
yourself more aLLracLlve Lhls valenLlne's uay, spend some Llme ln Lhe classroom so LhaL
you can earn more.
8uL lf golng back Lo school ls noL feaslble, Lhere ls anoLher way. 8esearch also shows LhaL
beLLer-looklng people make more money. Cne sLudy, for example, found a beauLy
premlum" and a plalnness penalLy" of 3 Lo 10 percenL each. 1hls means a very aLLracLlve
person wlll, on average, ouLearn an unaLLracLlve person by up Lo 20 percenL. So you can
make yourself more aLLracLlve, boLh physlcally and Lhrough your earnlng power, lf you
spend valenLlne's uay geLLlng a beLLer halrcuL, worklng ouL so you geL more Loned, or
buylng yourself some new and pleaslng cloLhes. !usL Lell her, l love you so much, honey,
LhaL l'm buylng myself LhaL sporL coaL." (1hough you may wanL Lo wordsmlLh LhaL
declaraLlon a blL.)
!"# %<' =.12 672 >*2 ?./@02 A"67
1hough sclenLlflc evldence on Lhls ls scanL, lnformal sLudles clalm LhaL valenLlne's uay ls a
common breakup Llme. 1he day, and Lhe hype leadlng up Lo lL, may remlnd people LhaL
Lhelr currenL maLe ls noL perfecL - he or she ls noL Lhe one."
Lconomlcs Lells us LhaL ln many markeLs, we have Lo keep searchlng unLll we flnd
someLhlng LhaL ls really good. We especlally spend a loL of Llme looklng for [usL Lhe rlghL
house and [ob, noL Lo menLlon cloLhes, grocerles and oLher regular purchases. 8uL you
also have Lo know when Lo sLop searchlng because, [usL as you wlll never flnd Lhe perfecL
[ob, you won'L flnd Lhe perfecL llfe parLner. 1haL person ls slmply noL ouL Lhere. 8reakups
have cosLs. 1here's Lhe emoLlonal Loll, of course, and Lhen Lhere ls Lhe use of Llme and
resources looklng for your nexL parLner.
So, before you leL some valenLlne's ldeal lead you Lo look for someone beLLer, Lhlnk a blL
more meLhodlcally abouL Lhe cosLs and beneflLs of movlng on. l am noL suggesLlng sLaylng
ln a relaLlonshlp LhaL ls abuslve or oLherwlse clearly dysfuncLlonal. 8uL [usL as every [ob
has downsldes and every house has a few qulrks you would raLher noL have, every llfe
parLner ls less Lhan ldeal. 1he cosLs of accepLlng someone really good are ofLen less Lhan
Lhe cosLs of belng lonely whlle you walL for someone beLLer Lo come along.
1hls valenLlne's uay, show your affecLlon Lhrough economlcs. Slgnal how much your maLe
means Lo you Lhrough a carefully LhoughL ouL and personallzed glfL. 1hen make your maLe
even happler by lnvesLlng ln yourself. llnally, sLop and appreclaLe your parLner - 1he
Cne" may noL exlsL, buL LhaL doesn'L mean your parLner ls noL A 8eally Cood Cne."