User:LBird BASc/sandbox/ATK/Seminar6/Power/Power and Pharmaceuticals

High developmental costs, initial costs of production, and barriers to entry into the industry has resulted in a monopoly of power in the pharmaceutical industry. Due to the nature of medical goods, such as comparably inelastic demand, pharmaceutical companies possess high corporate power, especially in the face of loose or corrupt government regulations.

Developmental Stages

The research and development(R&D) stage of pharmaceutical drugs allows for potential misuse of power largely due to the high cost of the process and the monopolisation of the non-clinical and clinical trials of the developing drug. In the UK, the average R&D costs of a new drug is £1.15bn which bars many potential firms from the industry. Smaller firms and individuals are then likely to sell the patent of the drug to larger pharmaceutical firms. Larger firms, however, are more likely to possess the resources that allow them to influence the results of non-clinical and clinical trials. Almost all pre-clinical and non-clinical trials done by pharmaceutical industry scientists either employed by the firm company developing the product or in industry-funded contract research organisations (CROs). The four phases of clinical trials can also feature scientists employed or contracted by the firm, or have taken large grants from the firm developing the tested drug. This provide pharmaceutical firms with overwhelming power to influence the results of the trials, which can result in the production and sales of ineffective drugs, or those with negative affects not known to the national regulatory authority. The high technical knowledge required and resource costs of trials further reduces the transparency of the effectiveness and safety of drugs.

Sales and Pricing

Firms often possess the power engage in "price gouging"(exploitatively high prices) due to their monopoly on the production of the drug through patent laws. This is more evident in nations with stricter patent laws such as the United States, where consumer pay up to six times the amount for drugs in comparison to global prices. Drugs are patented during very early stages of development which results in very low competition as other firms are unable to produce or further develop upon the existing drug. Larger firms are also able to bypass the lower market prices that would have resulted from the sale of generic drugs after the expiry of the patent through "pay-for-delay" agreements with generic companies so that generic drugs are not produced. Such agreements are estimated by the Federal Trade Commission to cost consumers and taxpayers $3.5 billion in higher drug costs per year in the United States.

The marketing and promotion process of new drugs further tip the scales of power towards pharmaceutical firms. Submission for marketing authorisations made to the national regulatory authority, pre-clinical and clinical results are submitted by the manufacturing firm. Medical communications agencies that promote the drugs to healthcare professionals commonly have links with patient organisations, many of which are powerful lobbying groups, which may result in their interest becoming aligned with that of the manufacturing firm. Other methods are also utilised in the promotion of drugs include donations such as those made by the producers of Cipralex to Depression Alliance, that required GPs to complete and feedback leaflet. Such methods decreased the transparency of the impacts of the drugs.