Gilead Science Inc.

With the reference of new hepatitis C treatment, hefty price of new treatment by Gilead Science Inc. is highlighted in media and other health platforms. There is a big question to Gilead Science Inc. that why are they charging such high price in America? High price of new treatment has really put health insurer and state Medicaid programs in big trouble.
Answer to that question we need to understand the economic concept of Gilead Inc. that enjoys the state of monopoly. Gilead Inc. is patent owner and sole distributer of the new hepatitis C treatment drug that makes Gilead Inc. to control the market and create monopoly.
Little background
Hepatitis C is one of the deadly disease in the world. Hepatitis C is caused by Hepatitis C virus that affects

In that case, monopolist has to lower the price to sell more quantity that means the marginal revenue falls rapidly as compared to monopolistic demand. Considering this, Gilead Inc. realized the effect of lowering down of price versus quantity and found out the willingness to pay by buyer for this new drugs. Gilead has come up with the price of $85000 for the new medication in U.S. (Fig; 1). This price is too high for people’s expectations and created big problem for many insurance companies and Medicaid program however Gilead does not bother to consider and just enjoys the high profit (Fig;2). In this case, the quantity demanded is less however with high price there is high total profit whereas this situation brings another negative factor called deadweight loss. There are many people who are willing to buy the new oral hepatitis C medication but due to high price they could not afford it and results in deadweight loss (Fig. 3). Considering this, Gilead has identified the buyers not only in America but throughout the world. Gilead maximizes the profit with the help of price discrimination. As mentioned above in America, Gilead is offering Sovaldi at the price of $85000 whereas in UK and Europe it is $57000 and in developing countries it far cheaper up to $1000. Egypt, Pakistan, India and Bangladesh are few of example of developing countries where

In the case of monopoly, it is already clear that consumer sovereignty is exploited and it is really hard to overcome such situation timely.

Ways forward to overcome monopoly:
1. To break the Gilead’s monopoly there is need of introduction of other competitors with same product or similar substitutes. It is high time to pharmaceutical companies to extend their research and come up with Sovaldi like compound that would trigger the market competition and would bring Gilead’s offered price down.
2. There could be many ways where government can intervene and break the monopoly like;
a. Government tax imposition
Government can levy some specific tax like sales tax per sale of Sovaldi. This tax will be shared between consumer and producer and overall price will increase, results in decrease in sales of Sovaldi, so total revenue and profit will be decreased.
b. Price regulation by