The Pharmaceutical Industry and the AIDS Crisis in Developing Countries

Economic: Globalization of the pharmaceutical industry is an exciting opportunity to have research and development done at cheaper prices in other countries. However, this could be a double edged sword for companies because it is easy for other countries, such as India, to produce generic versions of the drug in bulk.

The prices of prescription drugs in the United States are by far the highest in the world. [1] On average, Europeans pay 40% less than Americans for the same medications. [2] Consumers have been resorting to several ways, sometimes putting themselves in harm’s way, to alleviate the burden of high prescription drug costs. Some buy their medications online or cross the borders to neighboring countries so they would be able to afford buying their needed medications. Others have resorted to the illegal act of selling their unused medications in online forums just to recover part of their expenses. Many factors contribute to the increased drug prices in the United States including research and

HIV/AIDS has been responsible for one of the worst epidemics in history. In her book “The Invisible Cure” Helen Epstein details why Africa in particular was so devastated by the disease, which countries failed and which succeeded in the struggle to contain the virus, and why this happened. Epstein highlights a particular phenomenon, that first took place in Uganda, but which can be translated to many countries and situations, and which she calls “the invisible cure.”

1. Pricing: Many Asian and African countries are poor and cannot afford the costly medicines. The Pharmaceutical firms spend vast amounts on R&D in creating and marketing drugs, thus charging high prices enables for cost of capital recovery and profit generation.

Did you know “AIDS is the leading cause of death in Africa” (Quinn, online). Twenty percent of Africa’s population has died from AIDS. Poverty is a big problem in Africa. Men have been forced to become migrant workers in urban areas. And antiretroviral treatment at this time is not available to African people. AIDS is a big problem in Africa today that is now requiring help from the world.

Competition is one of the major reasons why companies cut the prices of their products and services. If other companies were to charge high prices for their products, this would mean that by reducing prices, the company would attract more customers. Pricing of medicine in most cases does not depend on the available resources, but rather, a decision by the manufacturer.

Since the first occurrence of an HIV/AIDS case in Australia in 1982, Australia has been responding proactively to come up with preventative methods and treatments for the illness. Over the last ten years, we have committed over $600 million

This is where industry regulations come. The regulations discourages the monopolies and oligopolies from charging unfair prices for their products.

In all three degrees of price discrimination firms are able to make more profit and eliminate any excess capacity they may have. Firms are able to do this by charging higher prices to those consumers with a more price inelastic demand for their product. The firm is reducing the welfare of these consumers by changing them at the maximum price they are willing to

As for whether or not it is ethical for companies to decline selling a useful drug in a foreign country because they can make more money marketing the drug elsewhere, I am again neither in agreement or disagreement on this one. It is a company’s chose where and to whom they want to sell drugs to. However, in poor countries, people cannot easily afford anything. Companies would have to reduce their price significantly even by selling in bulk. If they sell to China or other countries that can afford the drugs, I am sure they would do so but they also risk losing money.

Katie Thomas wrote an article for ProQuest on the raised prices and she references what many companies claim, “But drug companies say the prices reflect the enormous investment of time and resources that go into bringing a drug to market and argue that many times, their drugs can prevent more expensive medical interventions like surgery and hospitalization.” This proves that simply requiring companies to lower prices is not really possible as the costs have to pay for multiple aspects in the drug’s company. This also leads into a point made by Harris Meyer in an article for Modern Healthcare where he says, “the idea that lower prices will reduce the financial incentives for developing new breakthrough products.” A lot of the income from these drugs goes into the research and production of new and more effective products. Another reason for companies to raise the prices is when companies are stuck with producing hard to manufacture drugs as also stated by Meyer, “But rising prices for generics have been triggered by a variety of factors, including a shortage of producers for harder-to-manufacture injectables.” This is a direct explanation of the EpiPen price hike. Evidently, there is a lot that goes behind the pricing of these drug by pharmaceutical

In this case study I was asked six question the first one was,Do pharmaceutical companies have a responsibility to distribute drugs for free or at low cost in developing countries? What are the main arguments for and against such an approach?

In oligopoly market, each firm has substantial market power with high degree of interdependence. The key for success in a oligopoly market is to gain more market share than the competitors. Increasing the price can lead to loss of market share to the competitors, so in the oligopoly market, if a firm decreases the price, the other firms will always follow, but if a firm increase the price, the other firms will not follow. The demand curve is kinked.

Yes, there is an impact on the pharmaceutical company, like those in the US as a result of differential prices between that country and other nations.

b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.