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Critical Thinking for Pharmaceutical Industry

Question:

Discuss about the Critical Thinking for Pharmaceutical Industry.

Answer:

The central issue in the given case is the relatively high pricing of medicines in US as compared to other developed countries such as Canada, Germany etc. One of the rationales that is extended for this apparent mismatch is that America accounts for the largest number of drugs being invented and therefore America needs to pay for the high fixed costs involved in the research and development process. The other nations primarily feed on the discoveries already made in America and hence thus leading to the slowing down of the research in the pharmaceutical space (Sowell, 2002). Thus, it needs to be analysed whether following of similar policies that are pursued by the US in other developed countries would lead to faster cures for the various chronic and currently untreatable diseases.

There is evidence to believe that there is a linkage between the medicine prices and the amount of research conducted. In this regards, it is pertinent to note that the total research and development spending in the US is greater than that in the whole Europe together. However, the prices of medicines in US are also significantly higher than the corresponding prices prevailing in the other developed countries of EU (Sowell, 2002). While this definitely leads to the belief that there is indeed a causal link but I believe that the drug companies overemphasise on this fact. The prime motive of these companies is to maximise their profits by emphasising that R & D cost are so huge that prices need to be kept high so as to constantly invest in new drug formulations. Hence, the case of pharmaceutical companies has been carried too far with astronomical prices that are not affordable and hence do not serve any purpose to the society. Ideally, the prices need to be rationalised keeping in mind affordability, innovation and social welfare (LeWine, 2015).

Further, with regards to US being the cost bearer while the world benefits is also incorrect as since the companies are based in US, they would tend to focus on the priorities of the US government and incidence of diseases in US. These may be significantly different from those of other developed nations especially when any particular nation is facing any particular epidemic which has zero prevalence in the US (Kieny, 2016). Further, the lack of drug availability in other countries due to lower prices essentially leads to diseases not being cured and increases the incidence and risk of diseases. Thus, I disagree with the proposition that US is suffering while others are benefiting. Even the others are suffering, however, their suffering is not in the form of high medication rather the lack of medication (Sowell, 2002)..

There is a plethora of evidence which reflect that the high prices do not necessarily lead to innovation. When the high prices are insured, there is a proliferation of medicine for the same disease which is not really required (Bach, 2014). However, the drug companies keep on launching their own respective brands even when the market might be small and saturated, A prime example of this is witnessed in case of drugs devised for treatment of cancer. This is apparent from the below mentioned figure which indicates that almost seven companies are in the process of  producing medicines for lung cancer with almost similar composition and mechanism  in a bid to earn huge profits and not for societal benefit (Harper, 2014).

When a particular disease is already treated by a drug, it makes sense to focus innovative efforts on other diseases that might be still be lacking any cure. However, the drug companies tend to proliferate the space where astronomical high prices are charged and do not focus enough on societal needs (Bach, 2014). Thus, it would be worthwhile if the government intervenes in the market and fixes high prices to those medicines which are priority for the society and are life-saving drugs rather than life prolonging drugs. Hence, the government intervention in prices could do a long way in correcting this imbalance (Kieny, 2016).

Additionally focusing on the chronic disease segment such as cancer and AIDS in the long term may be detrimental for the society as the available medicines have limited success in curing of these diseases permanently. Most of the medicines are meant to control damage and thereby prolong life and treatment. As a result, the healthcare spending by the government and also out of pocket expenditures by individuals keeps on increasing. This money could instead be utilised elsewhere where it could actually make an incremental contribution to the economy (Harper, 2014). Yet another concern with high pricing is the affordability of customers even in the US. It is estimated by NCHS that almost 8% of the Americans do not take their prescribed medicines as they cannot afford the same. This also includes a huge population with health insurance as the co-payment burden is so huge that it cannot be paid.  Hence, on one hand new medicines are being devised but what is their purpose if it cannot be consumed by the target patients (LeWine, 2015). This is a loss both for the drug manufacturing company and also the government and needs to be rectified.

On the other hand, the high prices in the US should not be subject to any regulation as it may adversely hurt the innovation process with respect to drugs, This is because the government and politicians are driven by the ongoing political undercurrents and priorities and hence tend to curb prices in a bid to please a particular segment of the voter especially in an election year, This may spell doomsday for the pharmaceutical industry as the upfront cost involved in the research and development typically runs into billion and a reliable patent regime is required so as to provide an incentive for the drug companies to invest in the development of new drugs (Kieny, 2016). This is also evident from the example of Germany which had huge investments in drug research at a time but due to lowering or price, there was not much incentives for new drug research. Also, most of the German drug manufacturers are carrying out drug researches which are focused on the US market (Sowell, 2002). Thus, it is not a coincidence that US is the world’s largest laboratory for drug research in the world.

From the above discussion, it is apparent that while high drug prices do encourage innovation but in the US, the prices are way too high and need to be rationalised. There is no denying that drug research involves high fixed expenditures but the government needs to declare the priorities based on needs of the society and prevalence of the disease and thereby form pragmatic policies where the interest of all stakeholders is safeguarded so as to have a sustainable arrangement in place. The current system in the US is skewed towards the drug manufacturers as a result of which they are minting huge profits. There is a need to rebalancing of these prices and the other nations should also follow pursuit as national priorities for all nations is not the same as that in USA.

References

Anderson, R  2014, Pharmaceutical industry gets high on fat profits, BBC Website, Available online from http://www.bbc.com/news/business-28212223 (Accessed on August 19, 2016)
 
Bach, PB 2014, Debate: Do High Drug Prices Drive Innovation, Or Hurt It?, Forbes Website, Available online from http://www.forbes.com/sites/matthewherper/2014/11/03/debate-do-high-drug-prices-drive-innovation-or-hurt-it/#37dfa14543a6  (Accessed on August 19, 2016)

Harper, M 2014, Could High Drug Prices Be Bad For Innovation?, Forbes Website, Available online from http://www.forbes.com/sites/matthewherper/2014/10/23/could-high-drug-prices-be-bad-for-innovation/#d700bc528135 (Accessed on August 19, 2016)

Kieny, MP 2016, A comprehensive and fair solution to the price of medicines, WHO Website, Available online from http://www.who.int/mediacentre/commentaries/fair-price-medicines/en/ (Accessed on August 19, 2016)

LeWine, H 2015, Millions of adults skip medications due to their high cost,  Harvard Health Publications, Available online from http://www.health.harvard.edu/blog/millions-skip-medications-due-to-their-high-cost-201501307673 (Accessed on August 19, 2016)

Sowell, T 2002, Bad Medicines, Capitalism Magazine Website, Available online from http://capitalismmagazine.com/2002/08/bad-medicine/ (Accessed on August 19, 2016)
 
 

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