Essay: Pharma’s monopolization of the drug industry narrows consumer choices of drugs

Are we overcompensating our medications? A study of 660 adults with lifelong diseases discovered that patients could not afford medications due to the price of prescription drugs increasing faster than the inflation rate for medical services (Sagal, 2006). Interestingly, Malaysia’s healthcare system is globally recognised as the best in the world even though the pharmaceutical market accounts 60% of the nation’s shared value since the government does not impose price control for pharmaceutical companies (Hassali, 2014). Pharmaceutical industry in Malaysia came into existence through enforcement of the Registration of Pharmacist Act 1951, Poisons Act 1952 and Dangerous Drugs Act 1952 whereby their main agenda is to turn a ‘healthful direction’ into a profit which bring distress to the consumers. Most opined that high-priced patented drugs benefit the field of research and development however, pharmaceutical companies’ monopolisation of the pharmaceutical industry brings more harm than good which narrows down the consumers’ choice of drugs, causes economical repercussion towards a country, and leads to effective implementation of public policies.
Drug manufacturers enjoy high status of monopolising the free market by controlling the price of prescription drugs. Although, some stipulates that drugs constitute as health economics towards a country in which the field of research and development is critical in the discovery of new drugs.
Pharmaceutical industry’s R&D should be proportional to the profits earned.While it is true that investments in the innovation of new drugs is beneficial, the effect of pharmaceutical companies’ monopolisation of the market will bring a negative effect as opposed to a positive outcome due to millions unable to afford prescription drugs to manage their diseases. A budget analysis towards pharmaceutical companies disclosed that out of billion dollars revenue generated,only a 18% was allocated to their R&D departments (Chen, 2015). Therefore, health insurance companies will need to negotiate price of prescription drugs with the pharmaceutical companies in order to safeguard the wellbeing of consumers in terms of accessing medication at affordable prices.
The harm of pharmaceutical company monopoly is that consumers’ choices of drugs are narrowed in terms of price comparison. The major key factor of this anti-consumerist situation is the lack of competition in the pharmaceutical market itself. When monopolists have no competitors, there will be no reason to improve, diversify, and lower the price of their products. Moreover, according to Zaret (2016), the natural inherent characteristic of an innovation market with high fixed costs for research and development of innovative products that cannot be eliminated worsens the consumers’ situation. Furthermore, price elasticity of demand of drugs has little to no effect on the drug pricing. In other words, even if the drug is high in demand to cure a life threatening disease, the pharmaceutical companies would not simply lower its price. To add matters worse, initiatives were taken by the pharmaceutical manufacturers where they have sought to prevent and diminish competition between brand name and generic drugs through “generic delay” and product hopping, as a way to protect their position in the drug industry by making minor modifications to drugs with expiring patent only to receive a 20-year patent on the modified version, and an agreement, pay-for-deal, where the brand name manufacture pays generic manufacturer to stay out of the market. Hence, consumers will have to pay more than necessary to acquire drugs.
Pharmaceutical market monopoly will cause a negative economic repercussion of a country on the long run. A negative correlation would occur on the long-term economic growth, and subsequently result in a sustained economic inequality throughout a nation. Poverty will strike when expenditure for drugs is beyond the people’s affordability. According to Birdsong (2015), a rich-poor gap will appear and increases the rate of predatory market behaviors that will hinder economic growth. It is a daunting economic issue when research-based pharmaceutical industry is for a fact a big business, and shall not adhere to economic problems. Negotiation on ways to improve access to life-saving drugs held at World Health Organization (WHO) lead to a question of “which should be given primacy, economic interests or public health concerns?” The pharmaceutical company shareholders consider the industry as a business, and not a charity. They would leave the market if the prices of drugs are low and preclude profit. This creates a pressing public health concern and increases death rates as many diseases are mainly prevalent in poor populations that have no medical countermeasures or only old and ineffective ones. A nation’s economy will be negatively affected due to monopolies of pharmaceutical companies.
Lastly, pharmaceutical companies’ monopolisation of the market results in more damage than good as they are able to rig the system through patent protection to keep drugs high priced. The 1984 Drug Price Competition and Patent Term Restoration Act provides patent holders market exclusivity and utilisation to distort the current pricing process and limit people’s access to life-saving prescription drugs. To illustrate, according to Pollack (2015, as cited in Levy, 2017), patent protections allowed Martin Shkreli to change the price of Daraprim, a medication used by AIDS and HIV patients from $13.50 to $750 per pill. Whilst rationality of intellectual property protection is significant to encourage the innovation of new medicines by providing protection for investments required by the pharmaceutical companies at a limitation period of 20 years (Peterson, 2014), the high priced prescription drugs would not be justified as not all consumers can afford. Nonetheless, pharmaceutical industries are exploiting the market distortion by spending billions yearly on advertisements to physicians to induce them that there is a difference between the new and old drugs to avoid price competition (Engelberg, 2015). Life is precious and consumers should be able to have access to these innovative drugs in which government needs to relook into the existing pharmaceutical companies’ monopoly policies for the betterment of the people.
In conclusion, pharmaceutical companies’ monopolization of the drug industry narrows the consumers’ choices of drugs, will bring negative economic repercussion, and leads to an increase of the implementation of public policies. The government plays a crucial role in regulating the monopolies to protect the interests of citizens. They can take measures to hinder the growth of monopoly power by eliminating premium drug prices that would ultimately benefit the public health.