Essay Sample on Generic Drug Pricing

Firstly, it would be important to note that a generic drug is a pharmaceutical drug that contains the same chemical substance as the originally developed drug, patented and innovated. Generic drugs are allowed for sale in the market after the expiry of the patent of the original drug. It is believed that the medical profile of generic drugs are equivalent in performance with the original drug because they have the same chemical composition. It should be noted that generic drugs comprise the same active pharmaceutical ingredients as the originally produced drug even though they may differ in characteristics like a manufacturing process, color, taste, formulation, excipients and how they are packaged. Besides, it is worth noting that generic drugs are not associated with any specified company even though they are subjected to government regulations in the United States (Dave et al., 2017). The regulations on generic drugs require that all the generic drugs must contain the same active ingredients as the original brand formulation. In the US, the Food and Drug Administration requires that generic drugs to be identical to or are within an acceptable bioequivalent range of their original brand name counterparts. This should be concerning pharmacodynamics and pharmacokinetic properties. Therefore, this essay aims to clearly define what generic drugs are, the various pricing strategies used for these drugs, and finally, the essay will establish the different social and financial impacts that generic drugs have on stakeholders.

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The evolution of the market for these drugs in recent years has led to many benefits in the healthcare industry in the United States. This is because there has been an increased reduction in pharmaceutical costs and greater consumer access to the required medicine (Dave et al., 2017). The fact that generic drugs offer bioequivalent products of a brand name drug that is not protected by a patent has helped generic drug market to obtain important niche in the United States healthcare sector, which consists of an estimated eight out of ten subscriptions.

It is true that the pharmaceutical market is money generating business. The prices of these drugs are on the rise and are getting expensive day by day. Today, the generic drug producers, who are usually a much cheaper option for those who need the drugs for everyday use, are also quickly becoming expensive for the consumer of a generic drug. It cannot be denied that it is quite difficult and confusing to understand the pharmaceutical market for the consumer. As had been evidenced, the generic drug companies have also started increasing their prices (Dave et al., 2017). This situation has made healthcare acquisition very expensive as most people are not currently able to get drugs they initially bought at low prices. On this note, it has been observed that the generic drug manufacturers market is what should be considered as an oligopoly market style.

Increased market completion has had a more significant impact on generic drug prices. According to a recent study conducted, it was realized that the average prices for the generic drugs in each six months and found that almost half the drugs in the study showed competition levels in which just two manufacturers produced the drug (Dave et al., 2017). It has also been observed that generic drugs with a high level of competition were linked with a possible more significant price drop than those with low levels of completion which were likely to have price increases. Also, it is true that with low market competition levels, there is a higher correlation with drug prices in lower-priced drugs concerning higher-priced drugs. Low competition in the market is believed to cause prices of drugs to rise for various reasons. Manufacturers of drugs may seek higher prices to offset the low prices of their products in more competitive markets. It is true that low market competition can cause drug prices to rise for various reasons. Besides, companies that manufacture generic drugs may be given more leeway with increasing prices for their drugs.

Unlike other developed countries, the United States allows drug manufacturers to set their prices, a scenario that has resulted in overall costs of medicine being higher than anywhere else. Surprisingly, insurers are passing this burden to patients through increased deductions. This is a significant social effect because most patients cannot afford healthcare services easily because of increased costs of drugs (Dave et al., 2017). On the financial aspect, after the drugs are manufactured, the company would want to recover development costs, as well as distribution and other producing costs. As a result, such drug manufacturers will automatically increase the prices. There is also an increased desire for more revenue and profit which is often driven by stakeholders. This idea has led to an increased financial strain on the people by spending much of their income on healthcare services.

A socially optimum strategy for the United States would be to help in marketing the generic drugs thereby gaining their brand loyalty at a lower price and after sometime increase the cost thus raising the profit level over time. With this, there will be a market for generic drugs in the US as well as globally. In the global perspective, one crucial area that manufacturers should watch is when the right on a given brand name drug expires in the different market around the world. By observing the patents in various markets, the generic drug manufacturers can push for their products to join the market quicker in some areas globally after their first introduction of the generic drug in the first patent ending market (Dave et al., 2017). The cost of generic drugs will depend on the number of manufacturers within a given drug market. This is because the more the firms, the cheaper the drug will be for the consumer as demand will be lower.

In conclusion, it is essential to observe that optimum pricing strategy is a necessary aspect in dealing with the generic drug. This is the main reason why manufacturers of generic drugs will always have a market even though the size will always vary. It should be understood that as long as the market has healthy competition, the prices of these drugs should always be low thereby allowing the consumer to obtain the drugs without extra burden.

References

Dave, C. V., Kesselheim, A. S., Fox, E. R., Qiu, P., & Hartzema, A. (2017). High generic drug prices and market competition: a retrospective cohort study. Annals of internal medicine, 167(3), 145-151.