PER 2015
the objectives of these big pharmaceutical companies, they need to have incentives for them to produce drugs which are profitable and maximise their profits. Therefore, it is important for them to have income revenue which can cover a large sum of cost and at the same time they need to take up the risk to do trials of the invented drugs for the experimental groups of patients. In view of this, these big pharmaceutical companies will be normally granted a 10 years patent for a new brand drug to secure their earnings. At the same time, these companies will also need to invest a lot in the marketing for their new drugs so they have a greater cost of production compared to the generic drug producers. For these reasons, the big pharmaceutical brand drugs have no way to sell their drugs cheap and a large sum of revenue provides attractiveness for them to invent in new drugs are important for the pharmaceutical market to function properly and it can bring some other positive externalities to the economy such as employees will be healthier and the country productivity can be improved showing by the increase in the country GDP. Also the sufficient supply of a large variety of drugs can also minimize the chance of the spread of disease which is crucial to the global economy to function properly without any interference from the outbreak of disease. For example, the outbreak of SARS in 2003 had brought an economic downturn to the economy of most countries in the world due to the weak business and consumer confidence. This suggests a well-established pharmaceutical market can have a great value in the global economy.
(Source: http://www.randalolson.com/2015/03/01/design-critique-putting-big-pharma-spending-in-perspective/) The diagram above suggests that the leading pharmaceutical companies in the world are generally spending more on marketing than the R&D side. Also, this tells us how much the big pharmaceutical companies will spend excluding other factor cost of production. Therefore, those brand drugs are impossible to be sold at lower selling prices comparing to those generic drugs which have not much cost on marketing and R&D.
17
Made with FlippingBook flipbook maker