Pharmaceutical Industry Pricing Models
INTRODUCTION
The pharmaceutical industry is praised as one of the leading industrial sectors. The fruits of its extensive research and development are traded worldwide and have improved the length and quality of life of countless individuals. At the same time, however, the industry is criticized for its marketing and pricing practices—and even for its research and development priorities. Industry's consistently high profits and large expenditures on research and development as well as on marketing that foster scrutiny and criticism.
The pharmaceutical industry is unique in the sense that that it is fundamentally based in research and development (R&D) but is also a manufacturing industry. Like other industries within the health sector, elements of it are engaged in health service delivery, as it becomes increasingly involved in the advising of appropriate use of its products. It is a segment of the health industry that is respected worldwide for its introduction of new products and is at the cutting edge of some of the most exciting areas of high technology, including genomics and biotechnology. Manufacturing costs are low in this industry; in-fact is less like other manufacturing industries and more like infrastructure with high fixed cost and low marginal cost-Refer Annexure 1 explaining the concept.
It should be noted that lower insurance coverage for drugs than that for other health services, coupled with the increased likelihood that people will incur catastrophic costs due to prescribed drugs, increases people's resentment toward the industry. How is it that an industry can be both praised and criticized at the same time? The answer lies in the conflicting roles and responsibilities the industry faces.
Furthermore, the demand for its products is both consumers driven (as is typically the case for other consumer goods) and generated from the decisions of others, such as physicians. It is clear that the pharmaceutical industry is unique in many ways, and
The pharmaceutical industry is praised as one of the leading industrial sectors. The fruits of its extensive research and development are traded worldwide and have improved the length and quality of life of countless individuals. At the same time, however, the industry is criticized for its marketing and pricing practices—and even for its research and development priorities. Industry's consistently high profits and large expenditures on research and development as well as on marketing that foster scrutiny and criticism.
The pharmaceutical industry is unique in the sense that that it is fundamentally based in research and development (R&D) but is also a manufacturing industry. Like other industries within the health sector, elements of it are engaged in health service delivery, as it becomes increasingly involved in the advising of appropriate use of its products. It is a segment of the health industry that is respected worldwide for its introduction of new products and is at the cutting edge of some of the most exciting areas of high technology, including genomics and biotechnology. Manufacturing costs are low in this industry; in-fact is less like other manufacturing industries and more like infrastructure with high fixed cost and low marginal cost-Refer Annexure 1 explaining the concept.
It should be noted that lower insurance coverage for drugs than that for other health services, coupled with the increased likelihood that people will incur catastrophic costs due to prescribed drugs, increases people's resentment toward the industry. How is it that an industry can be both praised and criticized at the same time? The answer lies in the conflicting roles and responsibilities the industry faces.
Furthermore, the demand for its products is both consumers driven (as is typically the case for other consumer goods) and generated from the decisions of others, such as physicians. It is clear that the pharmaceutical industry is unique in many ways, and