...Name: VINETHA KARUNANITHI No Metric: PGSM 0145/12 Tutorial :5 1. Is the monopoly on patented pharmaceuticals warranted? What barrier to prevent the re-importation into the United States of pharmaceuticals lower prices abroad (say, in Canada)? The monopoly on patented pharmaceuticals is an improper term, and represents only a limited warranty. First, it is limited in time. The company needs to recover its R&D investment and make a fair profit during the period of exclusivity. Second, it is limited geographically, as some countries will not respect intellectual property and allow their own pharmaceutical companies to copy innovations, making generic drugs even before the original patent expires. Third, it lacks the most important element of a monopoly: price control. In most countries, the prices of drugs are set by a governmental agency. The manufacturers are merely consulted; their influence is very limited. In the end, once the price is set, they can only decide if they are willing to sell at that price or not. Take it or leave it. The combinations of the factors above will put pressure on the pharmaceutical companies to expand geographically as quickly as possible, in order to maximize their chances of recovering their R&D costs and making a fair profit within the time period covered by patent protection. In order to do that, they will accept in some countries prices that are far from ideal – prices they would never accept in a true monopoly situation. In doing...
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...1) Is the monopoly on patented pharmaceuticals warranted? What barrier to entry prevents the re-importation into the United States of pharmaceuticals sold at lower prices abroad (say, in Canada)? Pharmaceutical companies try to maintain a monopoly in the early stages of a drug in order to recover R&D investment. During this period of exclusivity they will try to make a fair profit. This is not a monopoly in the true sense of the word because this period is limited in time. It is perhaps better to describe it as a limited warranty. There are also other limitations. Pharmaceutical companies in some countries may not respect intellectual property and may copy or produce generic drugs even before the patent expires. An important criterion of a monopoly is price control. However, in many countries, a governmental agency is responsible for setting the prices of drugs, making the influence of the manufacturers somewhat limited. This puts pressure on the manufacturers to seek overseas markets in order to maximize their chances of recovering R&D costs and to earn a profit within the period covered by the patent. By so doing the market for re-importation and parallel imports is opened. Some of the prices that the pharmaceutical manufacturers end up accepting under these circumstances do not define a true monopoly. There are several barriers to entry that prevents re-importation into the US of drugs sold at lower prices. These include the following: Price difference ...
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...is likeImpact of pricing strategy and promotions on sales on service/ solution: From time to time we come across instances where businesses are not realizing their full potential when setting prices. Sometimes this can mean missed revenues. The company’s top priority should be better pricing to its products. Price is the only revenue generating element among the 4P’s, the rest being cost centers. Indeed the pricing will capture the better essence of company’s products/services. The reasons for a company to have a better pricing strategy: * There are more chances to tap the hidden profits * Fit the realities of market place (Will customers buy at this price?) * Differential pricing and its success is improving its access to other low and middle income areas A well implemented differential pricing system will increase in sales of pharmaceutical manufacturers. In setting pricing policy, a company estimates the demand curve, the probable quantities it will sell at each possible price. It estimates how its costs vary at different levels of output . We will analyze by reviewing the existing literature on differential pricing and examples of successful and unsuccessful of such pricing is affecting the sales. We will also analyze different pricing strategies and its effectiveness of each strategy and their impact on sales. we also study situations when companies often face situations where they may need to cut or raise prices. As we progress the empirical study, we...
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...Definition of the Problem Consumers are taking advantage of price differentials for prescription drugs in other global markets by either physically crossing over to the Canadian border or ordering them from the internet. Analysis In an increasingly global environment, companies must become more aware of an empowered consumer. Information, such as pricing in other countries, is able to spread very quickly. American consumers often wish to be on an equal playing field with the rest of the world. This means that a service/good that is bought in the United State should be comparable in price/quality to the same good/service bought in another country. GSKoSmithKline (GSK) encountered numerous public relations and strategic issues with their decision to limit the supply of drugs shipped to Canada. Many American consumers chose to buy the cheaper versions of the drugs from Canadian pharmacies because of the significant price reduction. Many of these consumers, who were often low income or elderly, could not afford the United States drugs because of the expense. GSK’s Responsibility to American Patients Healthcare is a business, but it must be treated differently than other businesses. GSK has both a social and ethical commitment to produce life-saving drugs that are affordable and easily accessible to the American public. The large price differentials between drugs purchased in America and drugs purchased in Canada led many to believe that GSK was a profit-hungry corporation...
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...exclusive rights by the author. Topics in Economic Analysis & Policy is one of The B.E. Journals in Economic Analysis & Policy, produced by The Berkeley Electronic Press (bepress). http://www.bepress.com/bejeap. Price Discrimination and Smuggling of AIDS Drugs∗ Richard A. Hornbeck Abstract Patent-holding pharmaceutical companies are shown to be imperfectly able to charge differential prices for AIDS drugs due to the potential for black market exchange. Thus, greater segmentation in the international market through additional barriers to smuggling would induce firms to charge lower prices for AIDS drugs in poorer countries. Without these additional barriers, widespread drug distribution through mandated lower prices or weakened patent protection in the developing world would result in smuggling, undercutting demand in developed markets and reducing firms’ research incentives. By contrast, further market segmentation would allow policy makers to go beyond the induced price cuts and remove patent protection in many markets where the benefits to increased distribution would likely outweigh the losses to research incentives. KEYWORDS: price discrimination, differential pricing, AIDS, arbitrage, smuggling ∗ I thank David Autor, Gary Becker, Steve Cicala, Valentin Estevez, David Genesove, Daniel Gottlieb, Thomas Hubbard, Victor Lima, and anonymous referees for helpful comments....
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...Revised version, July 27, 2003 Abstract. The rapid erosion of privacy poses numerous puzzles. Why is it occurring, and why do people care about it? This paper proposes an explanation for many of these puzzles in terms of the increasing importance of price discrimination. Privacy appears to be declining largely in order to facilitate differential pricing, which offers greater social and economic gains than auctions or shopping agents. The thesis of this paper is that what really motivates commercial organizations (even though they often do not realize it clearly themselves) is the growing incentive to price discriminate, coupled with the increasing ability to price discriminate. It is the same incentive that has led to the airline yield management system, with a complex and constantly changing array of prices. It is also the same incentive that led railroads to invent a variety of price and quality differentiation schemes in the 19th century. Privacy intrusions serve to provide the information that allows sellers to determine buyers’ willingness to pay. They also allow monitoring of usage, to ensure that arbitrage is not used to bypass discriminatory pricing. Economically, price discrimination is usually regarded as desirable, since it often increases the efficiency of the economy. That is why it is frequently promoted by governments, either through explicit mandates or through indirect means. On the other hand, price discrimination often arouses strong opposition from the public. There...
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...The Pharmaceutical industry in India is the world's third-largest in terms of volume and stands 14th in terms of value. The Indian pharmaceutical industry has become the third largest producer in the world and is poised to grow into an industry of $ 20 billion in 2015 from the current turnover of $ 12 billion The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970.[5] However, economic liberalization in 90s by the former Prime Minister P.V. Narasimha Rao and the thenFinance Minister, Dr. Manmohan Singh enabled the industry to become what it is today. The lack of patent protection made the Indian market undesirable to the multinational companies that had dominated the market, and while they streamed out. Indian companies carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs. Although some of the larger companies have taken baby steps towards drug innovation, the industry as a whole has been following this business model until the present. The number of purely Indian pharma companies is fairly low. Indian pharma industry is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labour in India at lowest cost. In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of...
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...University of Zimbabwe Faculty of Commerce Department of Accountancy and Business Studies MACC502 INTERNATIONAL MANAGEMENT ACCOUNTING AND CONTROL Name Gweme .J. Netsayi SECTION A Manufacturing Industry With reference to the manufacturing industry critically review the academic literature and identify conflicting perspectives on the following costs and cost behaviours, select an appropriate ;;approach and justify your choice. a) The definition of fixed overhead and relevant range and the short-run and long-run behaviour of fixed overhead. Fixed overhead is the cost of manufacturing that does not change with volume but changes with passage of time or much higher quantity .it is fixed for a certain defined relevant range I n the short run but will change in long run. De Costa (1996) describes fixed costs as those costs which volume can be spread and identifies equipment and plant as limiting factors of production. When volume increase fixed costs remain unchanged up to a certain point that is the level accommodated by the available plant and equipment .Edwards J. D (1965)on the other hand gives two perspectives on fixed costs where direct costing treats fixed costs as period costs and are excluded from product costs. He goes on to note that depreciation is assumed fixed by direct costing but in the long run it is variable. The other perspectives noted by accounts who just measure and match revenue and expenses hence the...
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...developing a new drug at around US$800 million. Were it not for a patent system that rewards companies for risking millions on research, anti-HIV/AIDS drugs would not exist”, said World Trade Organization’s (WTO) director general, Mike Moore. 95 % of individuals worldwide who are infected with the HIV/AIDS virus live in poor countries, with almost no access to life-prolonging treatment because of barriers such as the high cost of drugs. One possible solution to the high cost of drugs seems to be through differential pricing schemes that charge poor countries less than the rich. This form of legal price discrimination is already used for vaccines and contraceptives, with prices as low as 1 % of those in the USA. Major pharmaceutical companies have recently promised to cut prices to cost levels in Africa. The aim is to cut the price for HIV/AIDS therapy by as much as 95 %. The big multinational corporations (MNCs) do not, in theory, object to differential pricing for their pharmaceutical products. But they still want patent protection and guarantees to prevent the re-entry of low-priced drugs back to developed countries. Delay can spell disaster when dealing with HIV/AIDS. A recent forecast sees South Africa heading...
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...Disadvantages of software Patents 1. Furthering Monopoly Software patents let companies such as Oracle buy up patents on technology created by others and then launch lawsuit after lawsuit as a way to generate revenue. This is what it means to be a "patent troll," and it's of course motivated by the huge sums that have been awarded by the courts in the past. It also puts the advantage squarely in the hands of the industry's monoliths, which are the ones with deep enough pockets to acquire and assert all that intellectual property. 2. Hindering Innovation By their very definition, patents reduce the sharing of new ideas. In the software industry--which relies on just that kind of diffusion to spur further innovation--that's particularly destructive. Software patents frequently have very broad or vague boundaries, making it highly unclear where the patented piece of a program begins and ends. Frequently, software patents cover what can be considered the equivalent of a sequence of notes in a piece of music; imagine if that were to happen in the music world! It has also been historically very difficult for patent offices to judge patent quality, or to realize when a patent application is too broad or covers something trivial. 3. Cost and Time Patents are extremely expensive, and the examination process takes a very long time. Not only are the costs extremely high to determine if a particular piece of software infringes any issued patents--thereby reducing the funds companies...
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...05 Anil Kumar Jadli – 11 J.Harish – 25 Khushal Malik – 28 Sharad Singh – 49 PHARMACEUTICAL INDUSTRY – Global Trend • • • • Mainly concentrated in the United States, Europe, and Japan Developing a drug from discovery to launch took 10 to 12 years. Cost of development of drug is between $500-$800 million. Drugs were strictly controlled by government agencies: o o o o Food and Drug Administration (FDA) – USA, CPMP – Europe 12% 8% North America Europe 38% 18% Asia Japan MHW – Japan DPCO & Indian Patent Act - India • • Size of industry : USD 960 billion in 2012. Few Firms control entire market (Oligopoly). 24% ROW • 4 Firms – Control 20% , • 20 Firms – 50-60%, • 50 Firms – 65-75% PHARMACEUTICAL INDUSTRY – Global Trend • Covered the chemical substance itself • Offered typically 20 years of protection • Usually a lag time of 1012 years by the time the patent was obtained and the launch date • Covered the method of processing or manufacturing the product • Very little protection because it was easy to slightly modify the process Global Issues in Pharma Sector • Prices in of the drugs varied in developed countries • US & Canada by factor 1.2 to 2.5. • Europe by factor 1.1 to 2.5. Parallel Trade: an outside company sells a patented product in a market not designated to sell the drug. o • Independent firm exploited parallel trade by using the differentials in price across various countries. • Generic Drugs: unbranded drugs of comparable...
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...CASE TEACHING NOTES The Global Pharmaceutical Industry Sarah Holland (Manchester Business School) and Bernardo Bátiz-Lazo (London South Bank University) 1. Introduction The case describes how the prescription pharmaceutical industry has changed since its modern beginnings in the early 1950s. The various forces affecting the competitive environment of the industry are discussed in terms of origins, immediate past and immediate future (2004 onwards). As a result, the note provides insights into the evolution of barriers to enter and exit the industry for prescription pharmaceuticals, while aiming to help students to recognise how to set boundaries for an industry. This is a detailed industry note on the “ethical” pharmaceutical industry which provides an opportunity to analyse key success factors of major players. The note centres on a descriptive overview of the predominant issues in the three major Triad market areas: the US, Europe and Japan (although major issues in emerging markets are also mentioned). The note covers the overall industry environment with in-depth discussion of the driving forces in the industry such as globalisation (in particular global regulatory issues, changing world demographics and worldwide pricing disparities); development of new technology; the importance of time to market; and amalgamations. The case also examines issues around corporate social responsibility. 2. Position of the Case The pharmaceutical industry case study lends itself...
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...Q1. Identify the main environment forces currently affecting the pharmaceutical industry. PESTLE analysis is used to help the organization to understand what is the current status of the organization and the external factors that are affecting it, whereas this also helps the management of the organizations to overcome the weak areas organizations by implementing the strategy for the future. Political The policies of the government had a great effect on the regulations and legal issues that defines both formal and informal rules for the industries innovations as compared to the other factors in the form of “parallel trade” as the attention of the industry was an increase in the economic importance’s where the government offered incentives that encouraged the industry to globalization as they focused on pharmaceutical industry to handle the challenges of price control, monopoly and trade. Overtime this led to a wide disparity in prices that exposed the industry to sensationalist newspaper headlines and consumer backlash. Economic The sales in the pharmaceutical related closer to the GDP due to the effect in interest, taxes, inflation and exchange rates that layered down the established market growth in emerging the market for the power of the payers as decision makers. The change that could also affect the foreign currency can also affect the export and imports of the drugs. Patents in other countries pay a lot for the proportion of drug cots themselves that leads to...
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...The Public Needs to Know(revised) Assignment 2.1 Joshua Hall Eng115 Professor Kimberly Sinnott 06/11/13 Developing new drugs for cancer patients has many issues that slows production of effective drugs. Cancer treatments and research for new and better medicine is one of the largest and most expensive developments. Trail and error in producing effective medication is extremely grueling. This has been going on for years,It has always been a problem with the managing of good care for a low price. When Companies conduct expensive research the companies want to make profit. Most of the drugs that have been introduced are expensive and provide few of the benefits that patients expect. According to the American Cancer Society, usually treatments and medications given to patients have side affects that often cause worst health problems to the patients. The process of accumulating components for prospective medications in the use of cancer treatment is an extremely long process. In most cases, the development takes years to even get a single drug to be manufactured for patient consumption. It must go through several fascists of laboratory testing. “From a “target” to a “drug”, to “trial” then finally, an approved medication in the fight against cancer” (Giulio Draetta M.D., 2012) Researchers use unique processes that extract compounds from natural organism...
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...World Market Strategies for Drugs to Fight Aids Jérôme Dumoulin, Yves-Antoine Flori, Philippe Vinard, Thomas Borel Key words: AIDS; drugs; price; developing countries. Abstract Faced with a situation where the market is unstable and the political context is crucial, we propose a three-part analysis. In the first part, an overview of the chronology of the main events shows that the evolution of the price of ARVs is interlinked with numerous issues of pharmaceutical patent rights. In the second part, we analyse the positions of stakeholders: how they behave in the market and influence market regulations. In the third part, we propose three scenarios which are both simplified interpretations of stakeholders’ strategies and options for the future. The first scenario is the status quo, where prices are high. The second scenario is driven by multinational companies who work to enlarge the markets by price differentiation and product diversification. The third scenario is driven by International Organisations which achieve a political consensus to enlarge access to ARV drugs through broader international financing and a systematic opening of the market to generics. Résumé Face à une situation de marché instable où le contexte politique est primordial, nous proposons une analyse en trois parties. Dans la première partie une esquisse de la chronologie des événements montre que l’évolution des prix des 214 Economics of A I DS and Access to H I V/A I DS Care… ARV est...
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