Caccappolo 1
Justin Caccappolo
Professor Janis
TA Wayoro Economic 103-SEC01
18 November 2016
California Proposition 61
The most expensive ballot measure of 2016 was California Proposition 61, the drug price
standards initiative. This proposition is prohibiting states from purchasing prescription drugs
from pharmacies at a higher price than the US Department of Veterans Affairs' price. The
proposition is just an attempt to lessen the control that the pharmaceutical companies have on the
open market. Currently, pharmaceutical companies put forth billions of dollars to researching and
developing drugs. Once developed and ready to hit the shelves, pharmaceutical companies can
then price this drug on the market at whatever price they want. There is a lot of room for error
and inefficiency to occur in this current market. Bernie Sanders, an activist of exposing the
corrupt prescription drug market, stated, "Access to health care is a human right, and that
includes access to safe and affordable prescription drugs." Healthcare, including pharmaceutical
drugs, should be both safe and affordable, but the resources put towards pharmaceutical drugs
show why they are not affordable for some people. These resources include scientists who
research and develop the drug, machinery, and raw materials such as chemicals, biological
elements, and enzymes.
The pharmaceutical drug market is a competitive market that encourages other
competitors. This competition creates a market where pharmaceuticals are available to a large
majority of people. Drugs will always be in demand as medication is always needed. The
production of a new drug is in hopes of this drug aiding those effected by the disease or illness.
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Those affected by the disease or illness need to take this drug, not just any random drug.
allowing pharmaceutical drugs to go to those with the highest willingness to pay (ignoring
insurance). This constant demand for a drug proves to firms that their product will be inelastic to
those who have a willingness to pay or need the drug to survive. This forms a market that moves
forward because the cycle of producing drugs and acquiring money from selling them gets fed
back into research and development. This inelastic market can be further broken down by Paul
Krugman and Robbin Wells in "Microeconomics 4e" by stating, "If demand for a good is
inelastic (the price elasticity of demand is less than 1), a higher price increases total revenue" (p.
170). Selling the pharmaceutical drug at a high price increases the total revenue of the
pharmaceutical companies. This money is then put towards developing new drugs, which is
helpful to society.
The main flaw in the pharmaceutical drug industry is that companies or firms have high.
fixed prices that do not budge. This results in a financial strain on consumers, especially those
who cannot afford the drug. The main argument is the research and development card. Wayne
Winegarde of Pacific Research Institution states, "On average, the R&D process takes 10 to 15
years and millions of dollars" ("The Economics of Pharmaceutical Pricing). If someone is
spending ten year