Essay on Market Failures Of The Pharmaceutical Industry

767 Words Sep 21st, 2014 4 Pages
Market Failures happen in many sectors of today’s economical world, but one that has been around and will always be around is the pharmaceutical industry. Today’s world is full of people who need something to survive day to day and to get better from an illness or disease. That something is medication made by pharmaceutical companies. Pharmaceutical companies are viewed as a monopolistic market. Monopolistic markets like that of the pharmaceutical companies tend to veer from the efficiency standard set in place for today’s big companies (). “Relative to pure competition, monopoly power elevates prices, increasing the monopolist’s profit at the expense of consumer welfare. Consumers lose more than monopolistic producers gain. Thus, total welfare falls.” (). With consumers losing more than the monopolistic companies gaining (the pharmaceutical companies) it is clear to see why this is a pure market failure especially with the excess profit earned by such a monopoly.
When monopolies come into being today, which is much more difficult in this day and age, the government tends to get involved to prevent and attack such powers. Government regulating the pharmaceutical company is a bit different in the aspect that they are already regulated when it comes to the drugs themselves, but what about the business aspect of it all? The government helps to regulate it with the implementation of health insurance especially health insurance for the elderly (Medicare). This cause the rates…

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