As promised last week, I will be discussing some of the economics surrounding the project and then relate that to the ethics discussion.
From an economic perspective, the industry presents a unique set up. On the demand side (in this case the consumer side) which includes everyday people like you and me, there are several unique aspects: medicines are largely controlled by prescriptions and we place a high value on life. These factors and others lead to a demand from the consumer that is largely insensitive to price changes, commonly called inelastic demand.
On the supply side, there are additional unique factors; most importantly is the high cost of research and development of drugs. The development can be broken down into these simplified stages: drug discovery/development, pre-clinical trials, clinical trials, FDA review. All of these stages lead up to a final cost that can be very high. Industry estimates place the production cost to be $800 million (Sampat, 2012).
Furthermore when we look at the market for innovation of new drugs, we can view it as knowledge. Continue reading