Price Gouging in the Drug Industry
When Martin Skhrelli, CEO of Turing Pharmaceutical announced that the price of Daraprim, a life-saving drug that treats parasitic infections, would have a 5,000% increase, from $13.50 to $750, he became the poster child behind the problem of pharmaceutical price gouging. He was able to do this, because his company, Turing Pharmaceuticals, bought the rights to Daraprim, a drug used to treat mainly parasites and prevent malaria. This gave his company the exclusive right to produce the drug. Shkreli was villainized within 24 hours, becoming the most hated man in America. He was villainized on media outlets, Twitter, and even Presidential debates; yet, he never changed his mind, and unjustifiably, the price of
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Many drug companies such as Valeant, Marathon Pharmaceuticals, and AbbVie, are also guilty of such immoral practices. In a memo that was obtained from global investment firm Canacord Genuity, the bank wrote that “the practice of price gouging is widespread throughout the industry” (Time). In another report from BMO Capital Markets, it stated that “Valeant’s price gouging tactic were a common industry practice, and that there were at least fourteen other companies that used such tactics to maximize their profit throughout the years” (Time). However, the only reason Skhrelli and Valeant were highly criticized, was in the degree that they made the price rise. It is a common industry practice to price gouge, but in smaller increased over many days, months, and years. According to Express Script’s Prescription Price Index, just last year, the prices of brand-name drugs have increased by an average of 16.2%. The pharmaceutical companies are able to do this because of two main reasons: 1) they spend more money lobbying than any other industry, 2) The Food and Drug Administration’s patent approval processes. In 2015, the Pharmaceutical Research and Manufacturers of America, the primary pharmaceutical lobbying organization, spent more than $230 million on lobbying politicians. This creates an obstacle for change as politicians influenced by these large drug companies vote for legislation that favor them. For example, the pharmaceutical industry has spent $70 million already this year, trying to fight a California initiative that would give states the right to negotiate prices, as well as get legal binding discounts on drugs that are patent protected (Time). PhRMA, has created an obstacle, by challenging the legality of the petition of the state measure, delaying the process of passing such an initiative. Not only is lobbying a problem, but the FDA rules that are meant to regulate the drug industry, has
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,
In some instances, the pharmaceutical industry in the United States misleads both the public and medical professionals by participating in acts of both deceptive marketing practices and bribery, and therefore does not act within the best interests of the consumers. In America today, many people are in need of medical help. In fact,the Federal Trade Commission estimates that 75% of the population complain of physical problems (Federal Trade Commission 9). They complain, for example, of fatigue, colds, headaches, and countless other "ailments." When these symptoms strike, 65% purchase over-the-counter, or OTC, drugs.
Many businesses that achieve great success become greedy and want more. Pharmaceutical companies, such as Turing, have been overpricing life-saving
Why do consumers purchase specific drugs for various ailments, sicknesses or diseases they might have? Why do physicians prescribe certain drugs over competitive drugs that may be available to the public? Why is it that most of us can easily name specific drugs that fit the many ailments of today’s society? On the surface the answer might be as simple as good TV advertising or radio commercials or even internet adds. The truth of matter is the major pharmaceutical manufacturers own the patents on these drugs and this gives them all of the marketing budget and muscle they need to promote the drug and control the pricing. The incentives for larger pharmaceutical companies are very enticing and as a result, they don’t mind spending the time in clinical trials and patent courts to get their drugs approved. Some will even get patents on the process by which the drug is manufactured, ensuring that no competitor can steal the drug or the process. This protects their large financial investment and nearly guarantees a large return for their investors. Many consumer rights groups claim this is nothing more than legalizing monopolies for the biggest manufacturers.
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 America, it has become a battle to earn a high paying job to cope with the expenses of a typical American. It has become even more of a battle for some people to afford medical prescriptions to keep healthy. Health becomes a crucial issue when discussed among people. No matter what, at one point or another, everyone is going to stand as a victim of the pharmaceutical industry. The bottom line is Americans are paying excessive amounts of money for medical prescriptions. Health-Care spending in the U.S. rose a stunning 9.3% in 2002, which is the greatest increase for the past eleven years. (Steele 46) Many pharmaceutical companies are robbing their clients by charging extreme rates for their products.
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.
The United States spends more per capita on health care than any other country, with the percentage of gross domestic product dedicated to health care doubling from 9% in 1980 to 18% in 2011(Kesselheim,). One of the contributors to health care inflation is prescription drugs. Pharmaceuticals account for about 10% of total health care costs, spending on pharmaceuticals is poised to swell in upcoming years as a result of the increasing prices of complex specialty medicines (Kesselheim). Name brand drugs are going to have to be set at higher prices, in order for pharmaceutical companies to receive a profit. If the patient has full coverage on a medication, there is a greater chance that medication will be taken, although it may not be
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.
Martinez, Barbara “Firms Paid to Trim Drug Costs Also Toil for Drug Makers” The Wall Street
...rm debate. The Pharmaceutical Research and Manufacturers of America have lobbied against legislation to allow drugs from other nations into the United States. Prescription prices in America have increased beyond affordability and are hindering the health of the nation. Americans are forced to bear the burden of research costs and are being turned into deviants and white-collar criminals. By ridding the monopoly of the pharmaceutical companies and evening the prescription prices throughout the globe, the drastic increase in prescription prices can be prevented. Even just passing legislation that in fact allows Americans to decide their own fate when it comes to their prescription medications, would have a drastic impact on pharmaceutical pricing. After all isn't it the point of the government to stand up for its citizens and care more for them, not its business.
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.
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
Price gouging is increasing the price of a product during crisis or disaster. The price is increased due to temporal increase in demand while supply remains constrained. In many jurisdictions, price gauging is widely considered as immoral and is illegal. However, from a market point of view, price gouging is a correct outcome of an efficient market.
Even before the medicine price increase, his business practices had come under scrutiny. He had acknowledged and has had criminal investigations and other claims of wrongdoing made against him. He has run into problems at both a hedge fund he once controlled and has also had other problems at a company called Retrophin another pharmaceutical company he ran and from which he was replaced and later sued by. He also lacked some of the essential qualities of a good leader those being empathy, humility, experience, and general interest in truly leading a company altogether. Martin Shkreli is the epitome of a bad leader. Firstly, he had a major lack of experience in both leadership and the basis of the company he was running. Most successful CEOs have a deep experience and truly understand the products that they are selling. However, Martin Shkreli had no such experience his major qualifications was a business degree and only major experience was running hedge funds which he had got in trouble with the law. Martin lack of experience and knowledge in the field medicine as well running business overall was a strong indicator of his poor leadership. Although he Shkreli is a minor part in a more major issue his ability to even do what he did and be able to be so morally bankrupt and inept at running company yet do so is even more