i) For Mylan Inc., the owner of medical device EpiPen, the primary challenge of the product is balancing its profit-driven pricing strategy with ethical consideration towards customers. This can be attributed to two key factors: the near-monopoly it has historically held over the epinephrine autoinjector market, and its need-based demand, as a life-saving necessity for anaphylaxis. Exploiting limited competition, from acquiring EpiPen in 2007 to 2016, Mylan incrementally increased the EpiPen’s price from US$100 to over US$600 despite manufacturing and dosage costs under US$1 each. As noted by the Antitrust Committee, “This outrageous increase in the price of EpiPens is occurring at the same time that Mylan Pharmaceutical is exploiting a monopoly …show more content…
Product necessity limited their influence, but increasing buyer power due to competition will allow demand to potentially alter pricing. Distributors such as pharmacies and wholesalers are the intermediary between Mylan and customers, selling EpiPen packs at an average margin of US$334 (Mylan, 2017). Their price gouging has been attributed to Mylan paying them rebates to win business (McLaughlin, D and Hopkins, J 2017). Mylan’s owners (shareholders) are somewhat responsible for EpiPen’s strategic direction through electing a board of directors. Whilst they rejected executive pay increases, they recently re-elected the board despite disagreements. (Reuters, 2017) Governments regulate health, safety and IP law. Notably, the USA’s Federal Drug Administration had previously only given patents to EpiPen for epinephrine autoinjectors, creating an institutionalised basis for monopoly. In late 2016, the FDA confirmed it had approved 3 other devices (Woodcock, J 2016), arguably the major catalyst in EpiPen’s newfound …show more content…
Notably, CVS offers the generic Impax autoinjectors two-pack for US$109, leveraging fair and ethical pricing in competitive differentiation (Georgescu, P 2017). As some countries cannot access alternatives, EpiPen faces geographically-segmented time pressure to position themselves as an ethical, accessible product. Ultimately, the fall of EpiPen’s monopoly encourages more ethical pricing, but EpiPen can still position itself in competitive markets as a ‘premium product’ rather than absolute competitive parity, leveraging its brand familiarity over the past 25 years to create value through trust, a major factor in the decision-making process for
Johnson & Johnson, a healthcare company that has dominated its industry for several decades, is currently undergoing managerial upheaval in light of recent blunders amongst its top-tier managers. It has spent years priding itself on appeasing stakeholders and being a safe provider of various pharmaceuticals, but product recalls and subsequent revenue drops have plagued the company as of late. Alex Gorsky spearheads Johnson & Johnson’s revival after previous CEO William Weldon resigned due to missteps. The cause of which stems from misinterpretation of common business ethics through poor leadership and social responsibility that damage the stakeholders.
Anna Wilde Mathews and Jonathan Rockoff authored Megadeal Unites Drug Rivals in a published WSJ.com article of July 22, 2011. The article addresses the merger of two pharmacy benefits companies, Express Scripts Inc. and Medco Health Solutions Inc., along with the merger’s ramifications on the health care industry. This strategic merger is expected to impact the pharmacy benefit manager (PBM) market in conjunction with influencing drug costs and channels and possibly raising anti-trust concerns.
There seems to be no law protecting patients from the price increases that these big pharmaceutical companies are making. Marcia Angell, is an American physician, author, and the first woman to serve as editor-in-chief of the New England Journal of Medicine. In chapter 10 of her book, The Truth About the Drug Companies, she talks about stretching out the idea on monopoly. Patents makes it illegal for a specific set amount of time for competitors to sell the same/similar drugs. Once the patent is over, when the company loses its rights to a drug, the Food and Drug Administration (FDA) arranges for the generic version of the drugs made by a different company to go out on the market. When there is only one generic brand on the market, the cost may not be as cheap because the generic brand and the brand name shadow prices. This keeps the generic version just beneath the price of the brand name. Although the generic is not that much cheaper than the brand name, in the course of one year, the brand name company will lose hundred of millions of dollars due to generic drugs. From an economic point of view,
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:
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
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...
In the article titled, Why the $600 EpiPen Costs $69 in Britain by James Paton and Naomi Kresge depicts the overwhelming increase in the price of the lifesaving medical device in the United States. The EpiPen’s prices are comparable to the new iPhone 7 in the U.S. while it would only less than a leather case in Britain. In the article, an advocacy group was able to report that it is still a profitable business when being sold at lower prices. Take a look at Europe’s model for drug pricing compared to the U.S. In the U.K., the government and the pharmaceutical industry negotiate on the spending limits on health services. If a pharmaceutical company exceeds that negotiated cap, they must repay the government for their over expenditures. While in the U.S. they had some sort of
Pharmaceuticals are arguably one of the most contentious of all goods and services traded in the market. While medicines are as much a necessity as foods and water, they require more technical expertise and official approbation in the manufacture. Above all, they carry a moral weight that most market products do not (The Economist, 2014). This idea of moral can be linked to the recurring debate over whether a good health (which is represented by medicines, in this case) should be considered a basic human right, or just a normal commodity. A large portion of such controversy actually lies in an existence of drug patents: should we promote for longer-lasting patents or should we have their duration shortened?
In 2007, pharmaceutical company Mylan acquired Merck and their multibillion dollar generics business under CEO Robert Coury. Coury immediately appointed one of his top executives, Heather Bresch, to integrate the new products into the company’s pipeline. Bresch became Mylan’s COO later that year and decided to focus primarily on the Epipen, a spring-loaded syringe device created to deliver an exact dose of epinephrine, a severe allergy life-saving drug which immediately reverses life-threatening reactions to bee stings, peanuts, and other allergens.
Since generic drug company Mylan purchased EpiPen nine years ago, the current cost of EpiPen has increased by five hundred percent (Wieczner n.pag.). Earlier in August, Mylan’s CEO, Heather Bresch, on a conference call argues that EpiPen sticker shock should be accused partly on Obamacare (qtd. in Wieczner n.pag.) Bresch mentions that employers’ risen usage of high deductible plans, one of the aftereffects of the law, has followed in consumers paying extra out of pocket for the drug, and that is where lots of complaints around EpiPen is coming from (qtd. in Wieczner n.pag.). Besides, Bresch adds that the approximate six-hundred dollars extensive charge, that when you compare other treatments, the EpiPen does not land into the expensive product category (qtd.
In exchange for their support of Obama care, it is believed that PhRMA will receive preference on future policies that will be worth billions to the industry (Blaine). Also, laws such as the Food and Drug Administration Safety and Innovation Act limits foreign competition and counterfeit drugs which will increase the profits of PhRMA's
Although the pharmaceutical industry says that prescription medicines are as safe as they can possibly be, prescribed drugs have a high increase of risking a patient’s health. According to the law, drug makers seek Food and Drug Administration (FDA) approval for specific uses of their products and conduct trials to test their drugs safety and effectiveness in patients with specific conditions. The FDA demands that drug companies conduct rigorous clinical trials to prove a drugs safety and effectiveness in treating a particular disease. However, once the FDA approves a drug for one use, doctors can prescribe it for whatever they want. The FDA is considering loosening the monitoring of off-label prescriptions, but if anything, regulations should be tightened. Despite the practices of some medical personnel, the risk of serious medical complications demands that the FDA regulate and restrict off-label use of prescription drugs.
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.
The first social problem surrounding the health care system in the United States is the growing problem with pharmaceutical companies. The industry averages a 17% profit margin and it has been booming for decades, but the industry is being heavily led by a core group of companies (Dr. Pratt). “In 1992 the top 10 companies accounted for roughly one-third of global pharmaceutical revenue, after a period of consolidation, by 2001 the top 10 accounted for nearly half.”( Leon-Guerrero, Zentgraf, 172). These companies hold a large majority of the market share and make most of their money off patented drugs. This growing core of companies that are dominating the market are causing more problems rather than solving them. These companies are all about making as much money as they can and it shows through the salaries of the executives of these companies (Dr. Pratt). The pharmaceutical industry should have their number one priority be to the users of their products rather than profit gains.
Rising prescription drug prices are driving nearly two million Americans to cross international borders to seek necessary medications. Some are physically venturing into Canada and Mexico for the pharmaceuticals, while others are turning to mail-order pharmacies via the Internet. Purchasing prescriptions from Canada and Mexico is markedly less expensive than buying them at your local pharmacy or from a U.S. online pharmacy; however, the question is why? The why is what economists call price discrimination. It means charging different prices to different buyers of the same product. Price discrimination works in the drug industry because drugs are very expensive to develop, but inexpensive to manufacture. American consumers are exhauste...