Pharmecutical Companies: Are they overcharging?

Essay by Mel635University, Bachelor'sA+, March 2005

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There are many different takes on whether or not the pharmaceutical companies are over charging for their products. I will discuss both sides briefly and then give my final opinion.

For the pharmaceutical companies:

The pharmaceutical company's profit margins are not as high as some would have us believe. Compared to other industries marketing to the general public there percent of profit is much lower. For example Microsoft's profit as a percent in 2002 was 36.6 and Pixar's was about 44%. The leader in the pharmaceutical industry on percent net profit was Pfizer with a profit of about 28%, and the lowest of these was Bristol-Meyers-Squibb with a percent profit of about 12%. When comparing the total cost of manufacturing and the percent of profit the pharmaceutical companies are really not gaining that much profit (

Against the Pharmaceutical companies:

The pharmaceutical companies have been involved with price gouging. The companies have been reporting the cost of the drugs themselves and also offer perks to those doctors who will prescribe their drugs.

For example, when the government is deciding what to pay the companies for patients with a drug plan, the government promises the cost of the drug minus 12%. However, there is no watchdog reporting the cost of the drugs to the national data base, only the pharmaceutical companies themselves. Furthermore, we have all been to the doctor. Ever seen those pens, tissue boxes, note pads, and bags? Those were all given to them by the retailer. Furthermore, have you ever been given a sample supply by your doctor? Those were free to the office as well. But the things you don't see are the cakes, lunches, and the $$ given to the office. The marketing programs offer cash incentives for the doctors when they prescribe their dugs (