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Competition in the pharmaceutical industry
Pharmaceutical competitive rivalry
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The main controversy here is the question of whether or not Mylan was price gouging with the EpiPen. Unfortunately the answer to this question does not matter. It appears as tho the 500% raise in the price of the EpiPen over the past 7 years is ethically and morally wrong, but when it comes to the law they have done nothing wrong. Pharmaceutical companies are legally allowed to charge whatever they want for their products. The largest insurer in the United States of America, which is Medicare, actually rewards doctors for prescribing costly drugs. On top of being rewarded for issuing costly drugs, it is illegal for Medicare to negotiate prices on drugs. (Source) This most definitely does not help the price situation when it comes to pharmaceuticals. …show more content…
One of the lawsuits is classifying the EpiPen as a generic drug versus a brand named drug. This allowed Mylan to have to only offer a 13 percent rebate off the manufacturing price, versus a 23 percent rebate for a brand named drug. The department of justice was able to pursue legal action against Mylan, resolving the case for a $465 million settlement and having Mylan reclassify the drug as branded. (source) Mylan also has two lawsuits against them regarding trying to remove competition and domination of the EpiPen market. They are accused of manipulating insurers to only use their product by offering them large rebates, as well as specifically telling insurers they would only give them large rebates if they would not reimburse patients who bought a rival product from a pharmaceutical company named Sanofi. …show more content…
Despite what results of these matters Mylan clearly has been up to some shady business, keeping out the competition and significantly raising their prices. No legal decisions have been made besides the one decision to have Mylan classify their drug as branded and pay a $465 million dollar settlement. My legal decisions for the price gouging and other lawsuits such as removing competition would most likely be in line with the decisions that have currently been made, which is nothing. More information and investigations need to be put forth to see how true all of the allegations are against Mylan. If indeed through investigations it is found factual that Mylan has used non competitive contracts and gave kickbacks to insurers, then I would find Mylan guilty of antitrust violations. (source) Unfortunately when it comes to the main price gouging subject at hand, my legal decision for the price gouging would have to be one of not guilty. Although ethically and morally Mylan may be in wrong, they have not legally broken any laws with setting their prices at what they are. If Mylan is found guilty for antitrust violations, then soon enough other companies should be able to get into the EpiPen market and hopefully help regulate the prices. Until the pharmaceutical manufacturers drug price laws are changed, competition is the best bet for keeping drug
Economic responsibility requires a company to remain profitable in order to appease stakeholders and risk management and sound business practices play a large role in acceptable economic responsibility. Johnson and Johnson may have tried too hard to increase its profits, which resulted in mediocre production rather than timely inspection to ensure the products are safe for distribution. A halt in production may decrease profits temporarily, but in the long run, products distributed will be safer and revenue would resume to a normal amount. Instead, trying to be profitable and avoid loss in the short run made Johnson and Johnson less profitable in the long run. Failure in legal responsibility may have caused Johnson and Johnson to fail. The Food and Drug Administration (FDA) regulates drug distribution and has several criteria to pass in order to allow Johnson and Johnson to administer its premier medicines such as Tylenol. Not adhering to those laws allowed the distribution of unsafe medicines, subsequently leading to recalls and damaging the company financially. Johnson and Johnson tried covering up prior recalls of Motrin by hiring contractors to buy every packet (Kimes). Ethical responsibility requires companies do not perform questionable practices such as that described. The secret recall bought attention to Johnson and Johnson that it makes shoddy products out of the public’s view, which is wrong on many ethical bases. In the recent occurrence with Tylenol, Johnson and Johnson slacked on its labeling and tarnished the company’s
Depending on which insurance consumers have can affect how much out of cost or co-payments consumers will have to pay. Insurance can cover either a large portion of the cost of prescriptions or eliminate the $200.00 co-payment that EpiPens require. Some insurances may be able to perform both. Adam Fein, president of the Pembroke Consulting, states that “some insurers may have negotiated deals with Mylan that end up making the brand-name cheaper than the generic” (Drake 3). If this is the case, some insurances would rather have consumers purchase the name-brand version of the EpiPen rather than the generic version that is offered. Mylan Pharmaceuticals offers a coupon that takes off up to $100.00 per prescription. This coupon is limited to only three prescriptions of two-pack cartons, however. This would leave the total of the EpiPens to $500.00 before taxes. Mylan Pharmaceuticals also offers the Mylan’s Patient Assistance Program which “allows patients, whom are without insurance, eligibility to apply for free EpiPens” (Drake 5). Mylan Pharmaceuticals now offers no-copayment fees to those who use a savings card provided by Mylan when purchasing the name-brand
Pharmacy benefit managers (PBMs), act as an intermediary between the payor and everyone else in the health-care system. They generally make money through service fees from large customer contracts for processing prescriptions, operating mail-order pharmacies, and negotiating with pharmacies and drug makers. Their contracts can include incentives for cutting costs (Gryta, T., 2011). The use of a comprehensive generics program can significantly lower prescription drug costs, control utilization and play a major role in helping to improve overall patient outcomes. An estimated $35-$40 billion worth of branded drugs will lose their patent protection within the next five years, allowing them to be processed and marketed in generic form. Prescription drugs losing their patents are represented in some of the highest cost, highest utilization therapeutic categories, including depression, hypertension, gastrointestinal, pain management and antihistamines. The various pricing strategies that could be used to charge employers for prescription drugs used as drug pricing by PBMs utilizes the following tools are:
This is definitely a problem for consumers because they can have ties with the pharmaceutical and they have the ability to evoke the best interests for their company when pricing drugs. According to the drug makers and the intermediaries, the higher cost are needed to pay of rebates and providing discounts for insurers and employers. Despite providing incentives to those with insurance, this alienates those who have little to no insurance, they are left to burden the higher drug prices. In the U.S., there isn’t a checks and balances system when it comes to drug pricing like in the U.K. therefore some critics do not blame Mylan for raising the price for these drugs. Making and testing for innovative medicines requires years of research, which means money. Therefore, I do understand that drug makers, the pharmaceutical company and its investors want to get paid for the amount of time and money that they put into their new drug. However, I believe that they need to find that particular medium that helps the people especially those who are less fortunate and in need for this life-saving medication while being able to make a
A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. A monopoly sells a good for which there is no close substitute. The absence of substitutes makes the demand for the good relatively inelastic thereby enabling monopolies to extract positive profits. It is this monopolizing of drug and process patents that has consumer advocates up in arms. The granting of exclusive rights to pharmacuetical companies over clinical a...
Why does not America do something about these rip-off companies? In 2001 George Bush promised to lower the amount spent on prescriptions for the citizens, but in 2002, Americans spent $162.4 billion on prescribed drugs. (Steele 47) Drugs prices are not likely to fall back down to what they were years ago. They fall into the same category as fuel prices for automobiles; they always increase. There are more pharmaceutical companies present in the U.S. than any other country in the world. Th...
Why are the prices so high? Some critics of the drug companies argue that the larger firms are ripping off the American public, are dishonest and, in some cases, unsafe. On the other hand, there are health care workers such as doctors and their supporters who claim that research and testing for drugs costs money. This supposedly justifies their prices for their products. Also, as an argument to their side, they say that their practice is a benefit to the improvement to mankind. It is a life saving business, but are these prices justified? As one can see, this is a very important issue in medicine today. It affects everyone involved with medicine, which is much of the American public. It also affects the physicians and drug makers.
Due to patents, Pfizer and other companies in the pharmaceutical industry are not always competing in a monopolist’s competition. When a business has a patent, they are the only manufacturer who can produce the product until the product expires, so it is clear that the firm can act as a monopoly while in control of the patent. As a monopolistic company, the company has market power, giving it the capability to adjust the market price of a good. The main goal for a monopolist and business owner is to maximize their profits, however, there are rules they have to abide by. Monopoly companies still have to keep up with the market demand curve.
Merck & Co. has to be aware of the economy as with any industry. Within the recession, more and more were looking towards generic substitutes. This can at times not be a problem with patents. However, once a patent is up, a competitor who develops generic versions of Merck’s products becomes a low-cost competitor. However, during the recession from 2008 – 2009, Merck didn’t see any drop in sales. Actually, they were able to keep a continual increase in sales and net income.
In recent years’ health reform has been a driving force in the United States political system. If you watch the news, you will understand how citizens, the government, or the economy are or might be affected by some sort of change in medical regulation. One of these hot topic issues is the cost of prescription drugs. Every major drug market besides the United States regulates the price of drugs in some way (Abbott and Vernon). By the United States not doing so, many believe it opens consumers up to being exploited by large pharmaceutical companies.
Large pharmaceutical industries are making big profits on medications because they charge high prices for profit. These pharmaceutical companies are overcharging for medications that are essential to maintaining the health of patients. Having such a high cost for medication prevents patients from receiving the care that they need. This may result in patients resorting to desperate measure such as stealing and other illegal acts. The pharmaceutical industry need to reevaluate their ethical standards because the way that these companies are going about pricing their drugs is preventing patients from living a health life. These profits come at an expense of people who depend on those medications to maintain a quality of life. It is not ethical
Shkreli believes that this his decision is not only ethical but a decision that needed to happen. Shkreli argues that selling the drug at $13.50 puts Turing Pharmaceuticals at a loss, and that a price increase is necessary for Turing Pharmaceuticals to operate. Shkreli believes that if Turing Pharmaceuticals is profitable, it can use the money to do more research to develop more drugs that will help more people. In fact, in a new video, Shkreli claims that Turing Pharmaceuticals has created a drug that deals with a degenerative brain disease. He claims that only 300 people suffer from this disease and that if he didn’t raise the price on Daraprim, he would not have been able to produce the new drug. After
With the increased cost of manufacturing, pharmaceutical companies have been divesting in their smaller or less profit making operations and focus on large segments. Many Pharmaceutical companies sold their manufacturing sites to contract manufacturing organizations. The dynamics of interfacing with contract manufacturing organization added intricacy in pharmaceutical supply chain network of pharmaceutical companies.
Pfizer Case Study Pfizer Inc. is a large pharmaceutical company that engages in the discovery of new technologies, the manufacture of prescription and "over the counter" (OTC) medicines, as well as the marketing of such products. It operates in three distinct segments that include Human Health, Consumer Healthcare, and Animal Health. For fiscal year 2004, the company generated approximately $53 billion in revenue that contributed to over $11 billion in net income. Pfizer, 2004. "The 'Pfizer'" The Cow and Calf division of the Animal Health segment markets its products direct to cattle ranchers.
The case under analysis, Eli Lilly & Company, will be covering the positives and negatives with regards to the business situation and strategy of Eli Lilly. One of the major pharmaceutical and health care companies in its industry, Lilly focused its efforts on the areas of "drug research, development, and marketed to the following areas: neuroscience, endocrinology, oncology, cardiovascular disease, and women's health." Having made a strong comeback in the 1990's due to its remarkably successful antidepressant Prozac, was now facing a potential loss in profits with its patent soon to expire. The problem was not only the soon to expire patent on Prozac, but the fact that Prozac accounted for as much as 30% of total revenue was the reality Eli Lilly now faced. (Pearce & Robinson, 34-1)