The Differences Between the Demand for Prescription Drugs and Other Products

Development Costs:

Development costs are the costs a business incurs from researching, growing and introducing a new product or service. Development costs are commonly referred to as research and development costs. These costs can include a host of expenses, such as marketing analysis, developmental engineering and customer surveying.

Developing a new medicine takes on average ten to twelve years and costs more than £550 million. Before it is authorised for use by patients, it has to undergo a long and complex process of selection, testing and development.

Document 1:

[pic 1]

Pre-clinical Phase:

Promising compounds studied in animals, subject to strict ethical and legal conditions, to investigate effects that currently cannot be predicted from computer and test tube studies.

Clinical Phase:

• Phase I trials, usually in healthy volunteers, determine safety and dosing.
• Phase II trials are used to get an initial reading of efficacy and further explore safety in small numbers of sick patients.
• Phase III trials are large, pivotal trials to determine safety and efficacy in sufficiently large numbers of patients.
• Phase IV trials are post-approval trials that are sometimes a condition attached by the FDA, also called post-market surveillance studies.

The differences between the demand for prescription drugs and other products 

Prescription drugs is an act of prescription showing different therapeutic plan proposed by the physician or other licensed healthcare professional, guided and consented by the patient, and engaging the responsibility of the one who wrote it.

They usually helps the human to regain his normal body function and helps as well to cure some diseases and to kill any substance that is harmful to our body.

As we know the demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service at a specific price and specific time.

The consumer demands for prescription drugs differentiates from the demand for other products. The reason for that is that the consumer is not the person who takes the decision for which of the pharmaceutical drugs to use or to buy, that decision is left to the physician or to other healthcare professional. Therefore nowadays the insured person doesn’t need to pay the full amount for the prescribed drug. Instead he only need to pay a fraction of the drug cost to his insurer at the time of the purchase. Therefore these aspects for the demands for prescription drugs have encouraged many agency and indeed have as well increased the demand for this kind of medicine.

Another concerning factor that we must take into consideration is the price elasticity for the demand of prescription drugs which we can say it is definitely inelastic because of the characteristics of that products which is considered as a necessity. Consumers will no doubt continue to buy these products no matter the price change.

Another concerning trend is the extortionately high prices for prescription drugs that people have to pay in the United States, home of most of the pharmaceutical companies. Just across the border in Canada, people can pay up to 80 percent less for prescription drugs. In some European countries, people can pay even less. As a result, Vermont Congressman Sanders organized bus trips for people to buy drugs across the border. The pharmaceutical companies’ reaction? They claimed that in Canada this reeked of government interference. For whom? It is perhaps interference on corporate profits. What if the word used instead is something like government “support” for its people?

PRICE ELASTICITY

To make a sound estimate of the market potential of a product takes more than simply reading its sales figures.  Marketing strategists like to use price elasticity to measure the sensitivity of demand to change in price.  Price elasticity is obtained by constructing a demand curve to illustrate the relationship between prices and quantity sold (or revenue).  Demand curves are typically downward-sloping; demand would go up if prices were lowered and vice versa in a pure competition market.  Demand curve may be elastic or inelastic.  Demand is elastic when the slope of the demand curve is negative, while the demand is inelastic when the slope is positive.  Inelasticity usually occurs when the seller has little competition in the market or the product is prestigious.  To demonstrate these two scenarios, the demand curves of two drug products are plotted in Figure 1 and Figure 2.  Figure 1 shows the total sales of LIPITOR as a function of unit price during the period of 2005 to 2008.  This demand curve is downward-sloping, suggesting the best selling prescription drug is facing some competition after many years of profitability.  The competition comes from other branded products rather than a generic product because LIPITOR’s patent is still in effect.  It is also possible that the market ($8 Billions) has been saturated and there is little room for further growth.  Since the demand for LIPITOR is elastic, lower prices may boost its sales.  Figure 2 shows the demand curve of a newer cholesterol drug VYTORIN.  This curve is upward-sloping indicating the demand for.  Figure 1 shows the total sales of LIPITOR as a function of unit price during the period of 2005 to 2008.  This demand curve is downward-sloping, suggesting the best selling prescription drug is facing some competition after many years of profitability.  The competition comes from other branded products rather than a generic product because LIPITOR’s patent is still in effect.  It is also possible that the market ($8 Billions) has been saturated and there is little room for further growth.  Since the demand for LIPITOR is elastic, lower prices may boost its sales.  Figure 2 shows the demand curve of a newer cholesterol drug VYTORIN.  This curve is upward-sloping indicating the demand for VYTORIN is inelastic, and there is room for further price increase, assuming it is better than other peer drugs.  Rapid growth in sale is usually seen in young products such as VYTORIN, and this life cycle phenomenon will be discussed in detail later.