The article that I read for this
blog talks about the ins and outs of how pharmaceuticals are actually making
their money. The article also talks
about how the pharmaceutical companies are displaying information about drug
costs and expenses in a way that makes it more beneficial to the company and
displays the information in such a way as to disguise the real
information. This article is an
interview with Marcia Angell who is a physician and the editor in chief of the
New England Journal of Medicine. Marcia
talks about how the pharmaceutical companies display the cost of each drug to
distribute by including the opportunity cost.
The company displays the cost of distributing a drug as around 800
million dollars, when really it is only around 400 million dollars. The companies say that their numbers are more
correct because they take into account the cost of the time that they didn’t
spend producing another drug. The
opportunity cost ends up almost doubling the actual cost. Angell also talks about how the drug
companies mark up drug prices a whopping “20 percent” from the manufacturing
price. This article may be from 2004 but
still contains the important essentials for understanding how the
pharmaceutical industry makes it money and the costs that they have. Angell also talks about how the
pharmaceutical industry has much more product than it needs. She talks about how there are about 5 drugs
for every purpose. She feels that this
does not need to be occurring because every drug does the same thing.
Pharmaceutical companies make their
money from the production of drugs. The
profit is made from selling the drugs at a higher cost than what it took to produce. As previously stated that could mean
increasing the price by 20 percent to ensure a large profit. To the consumer this just means high prices
for drugs. The pharmaceutical industry
has an advantage. People need their
prescription medication. For people on
heart medication or cancer treatment they have no choice but to pay the high
prices that the companies charge. The
pharmaceutical company has many costs.
Their costs include production, transportation, and marketing. The article talks much about how the
pharmaceutical companies attribute much of their costs to research and
development. Angell talks about how the
companies attribute the high prices of the drugs to the fact that they need
money for research and development. The
pharmaceutical companies put much of their profit back into research and development
because research and development means different drugs. The more types of drugs there are the more
money companies can make. The more money
companies can make the more money they can put into research and development,
and thus a cycle begins.
Rachael Bieck
http://motherjones.com/politics/2004/09/truth-about-drug-companies
I find it interesting where the money goes in the pharmaceutical industry. It seems like it's the industry that spends the most money on research for it's products and less on the actual manufacturing process.
ReplyDeleteI really liked reading this, and I guess that it does make sense after all. It is like a cycle and in my opinion it is true that the more research and development that is put into new drugs, the more profit the companies will eventually make.
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