case2 - 10/2/07 Case Study #2 Drug Development in the...

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10/2/07 Case Study #2 Drug Development in the European Union 1. European drug companies have been at a severe disadvantage with their U.S. competitors due to many regulations and arrangements in the European Union. Many European drug companies have been finding it difficult to earn sufficient returns after bringing a new drug product to the market while competing in the global market. The main reason is that the EU determines the prices on brand-name drugs sold within its region. In the EU, prices are set by national health care providers. The authors of the text write, “Because the providers have the objective of reducing health care costs… they push for lower drug prices than those found in the United States.” (334). The European countries have engaged in their regional integration so they could possibly stimulate economic growth in countries, increase FDI and world production, distinguish the most efficiently produced goods and services in countries, and attain other gains from trade. The EU is deliberately trying to provide the best for all twenty-five members included, as well as its enormous population of citizens. The U.S. is merely based on capitalism, where these new pharmaceutical producers are allowed to set their own prices on drugs entering the marketplace and remain a private company. The U.S. drug companies strive to make a great income. Furthermore, the price controls vary from country to country, and this paves way to the emergence of a middle man. In this case, European countries will buy drugs from a country, and sell their products to a country that has a higher cost for the product. If I know anything about being a business man, it is to avoid doing business with middle man. Not always, but generally, middle man engage in arbitrage
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This note was uploaded on 09/08/2010 for the course BUS 187 at San Jose State.

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case2 - 10/2/07 Case Study #2 Drug Development in the...

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