Essay on Why Do They Get Away With It?

808 Words Dec 6th, 2015 4 Pages
Why do they get away with it? When exploring the nature of pharmaceutical markets, it is understandable as to why prescription drug manufacturers remain unharmed when setting their prices so high. In most markets in the United States, firms are held accountable by: competition from surrounding producers, a downward sloping demand curve (as well as other forms of consumer influence) and government regulation. However, in the case of prescription drug producing firms, in varying contexts, each of the above factors may become inapplicable or incredibly less influential.
Competition
Among students of economics, it is commonly known that in a competitive market producers rival one another in an attempt to ultimately maximize their own profits. In conjunction with challenging firms and consumers, retailers engage in a balancing act in which supply and demand eventually reach an equilibrium point. Their goal is to obtain enough costumers at a high enough price to surpass their break-even point and produce a profit. It is interesting, but not surprising to note that, new, innovative and successful drugs face almost no competition when they are first introduced to the market. This is due to time being a factor when developing and producing substitute goods (which would not be present yet as the drug is considered “new [and] innovative”). Because of this, firms see relatively high profits, which, in turn increases the number of producers who desire to enter that market (Roberts).…

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