Question

Federal antitrust enforcers are investigating whether a multinational pharmaceutical company has attempted to minimize the impact of generic competition to one of its most profitable prescription drugs. This antidepressant drug is the company's best seller, with sales last year of $2.11 billion, representing a 22% increase from the year before.

The Federal Trade Commission (FTC) is conducting an investigation to determine whether the company engaged in activities to prevent generic alternatives to the prescription drug from entering the market. Specifically, the FTC is challenging a practice among brand-name and generic drug manufacturers to agree to delay the introduction of the lower priced generic drugs to the market.

Answer the following questions:

Why would the drug maker want to stymie generic competition? Explain your response.

What types of legal barriers to market entry exist?

What are the possible ethical dilemmas that are present in this example?

Answer 1

1.

Drug maker wants to stymie the generic competition, because it will force people to buy the drug from this drug maker that is highly priced. It will increase the profit earned by the drug maker and it comes at a cost of consumers who buy the specific drug. If generic alternatives are present in the market, then people will buy these alternatives as they are cheap. but, the drug maker does not want consumers to have these benefit. So, drug maker wants to stymie the generic competition.

2.

Patent rights and its ownership is the firm legal barrier, as the firms can enter the market if and only if, they have the patent or rights to use the patent. Besides, high cost of investments, and investments  on R&D are the other barriers in the given scenario.

3.

Ethical dilemmas are as follows:

A.  Tradeoff between gaining profit by preventing the generic drugs in the market, V/S creating value by decreasing the price of the prescription drug or letting generic drugs to enter the market.

B. Focusing more on the self interest by the drug maker and not considering the benefits of the society creates an ethical dilemma.