This website uses cookies to ensure you have the best experience. Learn more

The Power And Benefits Of Monopolies In The Pharmaceutical Industry

2367 words - 9 pages

Due to patents, Pfizer and other companies in the pharmaceutical industry are not always competing in a monopolist’s competition. When a business has a patent they are the only manufacturer who can produce the product until the product expires, so it is clear that the firm can act as a monopoly while in control of the patent. As a monopolistic company, the company has market power, giving it the capability to adjust the market price of a good. The main goal for a monopolist and business owner is to maximize their profits, however, there are rules they have to abide by. The monopolistic companies still have to keep up with the market demand curve. The point at which they decide to produce will rest on their own acidities of revenue, risk and effort. The company also needs to know the price elasticity of the curve: the greater the price elasticity, the more a company such as Pfizer will struggle to establish high prices and a high volume.
Although monopolies appear damaging at times, there are arguments that they are an advantage to society. Monopolies in the pharmaceutical industry drive companies to pursue research and development (R&D) efforts to gain new patents. According to a 1992 study, among the 24 US. Industry groups, pharmaceuticals dedicated 16.6% of their amounts to basic research, while all other industries averaged at 5.3% (Sherer 1307). This fact validates the incentive pharmaceutical companies have to get a patent and acquire more power. Pfizer encourages R&D because of the incentives and a want to obtain patents to receive more profit. Pfizer has to promote itself to be successful, creating a good brand image that consumers will trust. If the company can advertise successfully, more consumers will purchase their products. Pfizer must also be generating products efficiently in order to save and use existing resources, while manufacturing their products at low costs to stay competitive.
Since Pfizer functions in a monopolistic competitive market and plays a major role, they are able to charge high prices on prescription drugs. Many consumers, especially seniors, feel that these prices are too expensive and cannot afford to purchase many of the brand name drugs. Pharmaceutical companies often justify their prices, claiming prices are high so they can continue R&D. Companies also claim they need to increase revenue in order to offer consumers with the latest and greatest quality drugs. Pfizer is no different, claiming that if they cut prices the R&D budget will be greatly affected. In an effort to keep prices lower, Pfizer limits resources devoted to the R&D department so they can make up for the loss in revenue.
Critics outside the pharmaceutical industry still question Pfizer’s reasoning for high prices. As a publicly owned company, Pfizer must release their data to the public. The stockholders have a right to know about the progress of the company. This material benefits the public by allowing...

Find Another Essay On The Power and Benefits of Monopolies in the Pharmaceutical Industry

Merck and Vioxx, the implications of new product development in the pharmaceutical industry

2228 words - 9 pages team to unintentionally or intentionally overlook many hidden hazards which may lead to potential failures (Chandy et al, 2006) . This is particularly true in regard to the risks of product development in the pharmaceutical industry, particularly the amount of costs involved with research and development, the high failure rate of products under the scrutiny of the FDA, as well as latter costs of litigation and withdraw when hazards were

Pharmaceutical industry in the United Kingdom

1016 words - 5 pages INTRODUCTION Pharmaceutical industry in the United Kingdom The pharmaceutical industry in the United Kingdom directly employs around 72,000 people and in 2010 contributed £8.4 billion to the UK's GDP and invested a total of £3.9 billion in research and development. In 2007 exports of pharmaceutical products from the UK totalled £14.6 billion, creating a trade surplus in pharmaceutical products of £4.3 billion. The UK is home to GlaxoSmithKline

The Indian Pharmaceutical Industry

1976 words - 8 pages Introduction The Indian Pharmaceutical Industry is in the front rank of India’s science based industries. It is a highly organized sector. The Industry is estimated to be of worth $ 4.5 billion, with growth of about 8 to 9% annually. It ranks very high in terms of technology, quality and range of manufactured medicines. From simple headache pills to heavy antibiotics and complex cardiac compounds, almost each and every type of medicine is now

The Pharmaceutical Industry

2339 words - 10 pages , profiting $235.4 billion in overall drug sales (“Big Pharma,” 2008). In 2010 the sales increased to $307.4 billion (Stringer, 2011). This equates to 43% in total global market sales which spells big business for pharmaceuticals (“Big Pharma,” 2008). Usually, where there is big money involved, greed ensues followed by unethical business practices and the pharmaceutical industry is no exception. The purpose of this paper is to look at four

Corporate governance and firm performance in Pharmaceutical industry of Pakistan

3362 words - 13 pages on Pharmaceutical industry of Pakistan, on companies that are registered in KSE (Karachi Stock Exchange) and the data will be taken from the annual reports of each company from year 2008-2012.KSE (Karachi Stock Exchange) showed 8 pharmaceutical companies that are registered as of 2014. All these will be selected for the present study. For purpose of empirical analysis we will use descriptive analysis, correlation and regression

Drugs: The Blood Diamonds of the Pharmaceutical Industry

1508 words - 6 pages allows for the development of new drugs without the taint of exploitation. In order to understand the injustices associated with clinical trials overseas, one must first understand what attracted pharmaceutical companies to developing countries. The globalization of clinical trials is a result of two motivating factors, a larger participant group, and cost effectiveness. Causes of Globalization In the past most clinical trials by American

Rogers’ Adoption Theory in Automotive Sales the Pharmaceutical Industry

604 words - 3 pages Introduction The Purpose of the study The purpose of this study is to determine whether the use of sales force automation technology in the pharmaceutical industry and the automotive sales industry is based on Rogers’ Adoption Theory. Also, the purpose of this study is to explore whether the use of this technology by innovators is due to perceived usefulness and ease of use, or whether something else is responsible for motivating

IT Project in the Health Industry for ZAP Pharmaceutical

1528 words - 6 pages Introduction: ZAP Pharmaceutical We are managing a large IT project in the healthcare industry for ZAP. Our project consist of the following task: refurbish the existing office building; install the IT infrastructure, and outfit the area for our new telephone answering hub. The project is in the execution phase, with three quarters of the work finish - refurbishing and installation of the infrastructure currently being done in concert with

Benefits and Inherent Risks of the Nuclear Industry

1000 words - 4 pages In the nuclear industry there are many benefits and risks. Nuclear energy, medicine, and the food industry show this. I feel that benefits outweigh the inherent risks. I think this because there in nuclear energy there are benefits, like how it is the world’s largest source of emission-free energy. In medicine there are many radioisotopes used to benefit humans through treatment. Radioisotopes are used to diagnosis and treat many forms of

The Sociat Costs and Benefits of a Fast Food Industry

817 words - 3 pages . The fast food industry may also sponsor local charities or sports teams, which benefits society. However, there are also many social costs in the existence of the fast food industry. These costs include health, choice and culture costs. Health-wise, the existence of the fast food industry means the existence of deep-fried, salty and ultimately unhealthy food. Many people don’t know about the unhealthiness of the

The Power of the Customers in the Automobile Industry

809 words - 4 pages 1. The power of Customer There are two categories of customers in the automobile industry: final customer, the actual users of the end product and industry’s customer, for instance manufacture company buying the necessary items from the supplier. The power of customer is the extent of an impact that the buyer has on a supplier or manufacturing business. Buyers are powerful if: • Purchase of large volumes • The product is standardized • Low

Similar Essays

Monopolies In The Market Place: Example Of The Telecommunication Industry

695 words - 3 pages Federal Regulations on Trade Traditionally many utility industries have been comprised of monopolies. These natural monopolies exist for a number of reasons. Monopolies in the marketplace create great inefficiency, and thus are very undesirable. It is for that, and many other reasons that regulation was thought of as a solution to the monopoly problem. Regulation was not just used to overcome such great inefficiencies created in a monopolistic

Corruption Of The Pharmaceutical Industry In America

2914 words - 12 pages of these symptoms, they are "sick" and in need of medication. 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

Marketing In The Pharmaceutical Industry Essay

2035 words - 8 pages average of 16 hours of drug advertising a year which by far surpasses the time spent in the care of medical professionals. However the ethics of DTC advertising is balanced, customers have increased bargaining power as they become more knowledgeable, yet are also more likely to self-diagnose despite their lack of expertise. To see how the pharmaceutical industry is ethically perceived, I conducted a survey on both Irish and Canadian residents. I

Corruption In The Pharmaceutical Industry Essay

1590 words - 6 pages has all the power in approving or denying any type of medicine, and the only ones they seem to be approving are the ones being made by the greedy industry. There are many natural remedies out there that helps your body fight off diseases, but why doesn’t the FDA approve of it? If the FDA allowed a simple, cheap remedy that can cure mostly everything, than the pharmaceutical companies will lose out in billions of dollars. So they work with the