Pharmaceutical Drug Companies Essay Example for Free

Pharmaceutical Drug Companies Essay Pharmaceutical drug companies comprise the main driving force behind drug design, production and marketing. Pharmaceutical companies are very active in research, wherein they devote 80% of their funds for research and development and only 20% to sales of their drugs. The concentration of these companies in research and development has significantly expanded in the last two decades, resulting in the introduction of a large number of drugs to the public. It has been observed that the amount of funds spent on research and development is strongly correlated with the strength of a company’s drug sales. Potent novel drugs generally result in huge drug sales that can be utilized or recycled for further research and development. Other resources such as stock market investments have been determined to be inferior tools for financing of activities of pharmaceutical drug companies because supplementary expenses are always part of such joint ventures. Unfortunately, fluctuations in actual drug prices directly affect the activities for research and development of drug companies because more expensive drugs result in an increase in the amount of income that drug companies generate, and only a small portion of the income is needed for investment. The continuous research and development activities of pharmaceutical drug companies only slightly stimulate the speed of development of new drugs that will be introduced to the market. The main governing body that controls the endorsement of prescription drugs is the Food and Drug Administration (FDA). This administrative group is also responsible for establishing standards for regulation and advertisement of drugs to both potential consumers and medical practitioners. The FDA provides requirements that advertisements accurately explain all pertinent information of the drug and appropriately present the benefits and risks of using the drug. It is required that drug advertisements be submitted to the FDA as soon as these forms of media are released to the consumer public. These forms of media include any types of publications, flyer distributions and broadcast media, including radio and television advertisements. In the past 5 years, the amount of advertisements for pharmaceutical drugs has grown significantly. Consequently, the number of communications released by the FDA regarding regulation of drug advertising has also increased. These communications explain the dangers of presenting deceptive and confusing information regarding the pharmaceutical drug that a company is promoting. Should the FDA determine that a drug advertisement has misinformed the public, the advertising pharmaceutical company is asked to change the content of their advertisement, or else the entire advertisement will be removed from further exposure to the public. Currently, there are fewer pharmaceutical advertisements that have been advised to be modified or removed, suggesting the pharmaceutical drug companies have lately been following the FDA regulations cautiously and properly. Society has been increasingly procuring pharmaceutical drugs during the last ten years. Drug purchase comprises approximately 10% of health care expenses in the United States, and it has been estimated that almost 3% of the entire household expenses of elderly adults are spent towards buying medicines (Kreling et al. , 2001). Such amplification in the general drug expenses per household results from variations in the price of the pharmaceutical drugs and the frequency of usage of drugs. A higher frequency of drug usage, as also influenced by the amount of prescriptions given by a medical practitioner to a patient, plays one of the major influences on the general increase in drug expenses. An increase in general drug expenses in a household is also influenced by the increase in price of the particular drugs that the household routinely procures for medication and health maintenance. Another force that generates an increase in the household expenses for drugs involves the switching from previous medications to newer prescription drugs. Old medications are usually replaced by newer drugs because newer drugs tend to be more efficacious and potent that the old medication. Unfortunately, newer drugs are commonly more expensive. It has been estimated that there has been a 17% increase in the purchase of pharmaceutical drugs recently, wherein 6% of such increase was due to inflation in the price of the pharmaceutical drug, and another 6% was due the actual increase in price of the drug itself, and another 4% increase was influenced by the switch from an old prescription to a new medication (NIHCM, 2002). It has been determined that the consumption of pharmaceutical drugs has increased yearly for the last 10 years, mainly due to the aggressive advertising and promotion of pharmaceutical drugs by the corresponding drug companies to medical practitioners. In addition, the increased utilization of pharmaceutical drugs is also influenced by the number of elderly patients that are being prescribed multiple pharmaceutical drugs for treatment and maintenance. Among such drugs are those effective to management of blood pressure, cholesterol, blood sugar and depression. The increase in the price of pharmaceutical drugs provides a way for a pharmaceutical drug company to acquire resources to funds their activities in research and development. Hence, there is always a factor to consider when picking a pharmaceutical drug. A drug that is preferentially bought by the consumer public significantly raises more revenue for the pharmaceutical drug company, and in turn, the pharmaceutical drug company is thus encouraged to design and develop additional new drugs that the consumer public will appreciate in the same way as they did with the principal pharmaceutical drug. However, the price of a pharmaceutical drug does not automatically determine whether the consumer will purchase that particular drug. An example to this dilemma can be observed in certain pharmaceutical drugs that are sold at such a high price when bought through its brand name, but the same active ingredient or the generic form of the drug can also be bought at an affordable and cheaper price. A certain fraction of the consumer public will purchase generic drugs instead of brand-name drugs, mainly to decrease their average household expenses of medication. Unfortunately, there are certain drugs that are unavailable in its generic form, hence the consumer has no choice but to buy the brand-name drug, which is usually very expensive. A comparative research has determined that the efficacy of a brand-name medication is as good as its generic form (Liebermann, 2005). The employment of insurance companies has facilitated consumers in reducing the prices of pharmaceutical drugs, wherein the health insurance companies have indicated that specific drugs with reasonable prices will only be included in their formulary of prescription drugs. Health insurance companies have also adapted co-payment options which guide the consumer to procure cheaper yet effective drugs for their treatment. In addition, medical practitioners are also advised that they provide their patients with both brand and generic names of the prescription drugs they are handing out to their patients, so that the patients will have the freedom to choose which pharmaceutical drug they will buy from the pharmacy (Lanjouw and Cockburn, 2005).