The Role of the Government in Pharmaceutical Pricing Essay Sample
Pharmaceutical companies often charge prices that are much higher than the cost of production of medicines, even the life saving kind. The profit earned by a pharmaceutical company is calculated by subtracting the cost of production from the price multiplied by quantity sold (“Price Controls,” 2007). The fact that the profit margin of the pharmaceutical companies is often too high is a cause of concern especially for those who cannot afford adequate health care. Ethics demand of the health care and the pharmaceutical industries to lower their prices so as to make health care, including medicines, easily available to all (Rosen, 2007).
At the same time, the Congress has experienced that the health care and pharmaceutical industries should not be forced to lower their prices via price controls that have been introduced in many foreign markets for pharmaceuticals. The reason why the United States would not introduce price controls to check pharmaceutical prices is that the profits earned by the pharmaceutical businesses help in research and development – of the essence in this industry (“Pharmaceutical Price,” 2003).
Yet, the Congress contains the power to lower the prices of pharmaceuticals by applying a different method altogether. Price controls have the potential to slow down growth in the pharmaceutical industry. But, subsidies on pharmaceuticals will not slow down research and development in the industry.
As a matter of fact, subsidies for pharmaceutical companies may very well be targeted for research and development. Price controls may be introduced to complement the subsidies, however. With price caps that would not permit the prices of medicines to increase beyond control, especially the life saving medicines; and subsidies to help the pharmaceutical industry in continuing its innovative work to benefit society at large; the government would find itself in an excellent position to care for the health of all Americans.
Price Controls on Pharmaceuticals. (2007). Marginal Revolution. Retrieved 23 May 2007, from
Pharmaceutical Price Controls Abroad: An Unfair Trade Policy. (2003, November 6). Retrieved
23 May 2007, from http://rpc.senate.gov/_files/hc110603.pdf.
Rosen, Leah J. (2007). Are Pharmaceutical Prices Just? A Discussion of Business, Values, and
Ethics. Pharmalicensing. Retrieved 23 May 2007, from http://pharmalicensing.com/articles/disp/1080562872_406814b87105d.