Final Exam Review - Chapter 9 Pharmaceuticals...

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Chapter 9 Pharmaceuticals Introduction -Most research intensive US manufacturing industry not dependent upon direct government contract support. -One of the most profitable industries. -Quality subjected to tough regulation from government, more than automobile quality. -Collection of differentiated oligopolies. -Monopoly power as a result of patients and physicians price insensitivity. Unique characteristics -Most products only available under a physician’s prescription. Two groups, prescription or ethical drugs, and proprietary or OTC drugs. -Prescription drugs account for 75% of total product sales. -Individuals suffering from illness will be willing to pay a lot for relief. Demand for medicine tends to price inelastic. Small amount of relevant suppliers, suppliers have monopoly power. -Demand is more price-inelastic when drug purchases are reiumbers wholly or in part by insurance. -Pharma leads in research to sales ratio. -Most of the new chemical entities are protected by patents, and also trademarked brand names. Patents and trademarks strengthen the monopoly power. -OTC drug makers have highest ratio of advertisting to sales. Ethical drugs are directed toward prescribing physicians. -“Detailers” are salespersons who attempt to visit prescribing physicial in their territory provindg brochures, free samples, and conversational give and take about products.
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