Running head: Defiant, Generic Drug Maker Continues to Raise Prices
Defiant, Generic Drug Maker Continues to Raise Prices
Wale
MGT - 605
Yohannes Mariam
April 29, 2020
Running head: Defiant, Generic Drug Maker Continues to Raise Prices
2
Defiant, Generic Drug Maker Continues to Raise Prices
While the generic-drug market has undergone relatively stable drug prices since "The
Drug Price Competition and Patent Term Restoration or Act Hatch-Waxman Act" was passed,
there has been an growing amount of increases in the price of generic-drugs (Augustine, Nass &
Madhavan, 2018). Such spikes are typically the product of a lack of business rivalry or a lack
thereof. Precisely, they arise because there are no entrants to the generic-drug markets or because
of the departure from the business of current rivals, thus creating an environment for price
increases. Although these increases do not affect national aggregate medication spending, they
have a significant effect on patients, who frequently have little or no choice but to pay higher
costs for the same medication (Augustine, Nass & Madhavan, 2018).
New medications for lives-threatening ailments like HIV, HCV, leukemia cancer, to name
a few, tend to be capable of commanding high price (Augustine, Nass & Madhavan, 2018)
Sovaldi and the Harvoni combination pill aren't the only costly medications available in the
market. All medications for multiple sclerosis (MS) cost more than $50,000 a year, several
thousands of dollars over an MS sufferer's life. New treatments for small cell lung cancer such as
Pfizer's Xalkori, and Novartis' Zycadia cost more than $100,000 a year. All new tyrosine kinase
inhibitors (TKR) for Chronic Myeloid Leukemia (CML) treatment also cost more than $100,000
per annum. The list goes on and on (Augustine, Nass & Madhavan, 2018).
Pricing is perhaps the most crucial element of the marketing mix because it is the key
factor that produces profit (Advameg, 2017). Price low and substantial sales and profits remain
on the table. Price high and restraints from payers, dissatisfaction and grievance from doctors
and patients neglection of such medicine at the pharmacy would significantly reduce adoption.
acceptance and penetration on the market. High pricing can as well lead to PR complications,
Running head: Defiant, Generic Drug Maker Continues to Raise Prices
undermining a company's reputation, as well as shifting management' attention. Pricing a product
correctly, however, will lead to broad acceptance/adoption by payers, doctors and patients, and
ultimately substantial market share (Advameg, 2017).
There are several pricing techniques which can be applied, depending on the type of
medication, the goals of the business, the competition and the market. By the reason of peculiar
nature of pharmaceutical products' distribution and selling structure, four distinctive strategies
can be used to determine drug prices: cost-based pricing, value-based pricing, dynamic or
competitive pricing and price skimming (Advameg, 2017)
To put it simply, cost-based pricing consists of adding up the sum of all the costs incurred
to sell a commodity and adding up a reasonable profit. Research, innovation, manufacturing.
packaging, distribution, and sales & marketing costs are usually