Tag Archives: economic incentives

What Ethical Duty?

As the project begins to wind down, I want to take a moment and reflect on the idea of ethical duties. I began this project in an attempt to understand the current situation of innovation within the industry (how it was being financed, how businesses developed it both within and outside of the company, etc.) so that I could gain a better understanding on issues relating to pricing and availability. I hoped to address the idea that companies may or may not possess ethical obligations to pursue alternatives by combining the new understanding of innovation with firm perspectives on alternatives for developing innovation.

As I listened to people within the industry and continued readings from opposite side of the debate, my understanding of ethical duties has broadened. Continue reading

Some economic background on the pharmaceutical industry and its relation to ethics

Resperine prescription

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