PHARMACEUTICAL INDUSTRY
- Specify the types of country risks that pharmaceutical firms face in international business. How do the political and legal systems of countries affect the global pharmaceutical industry?
Pricing of stock risk. Many countries in Africa and Asia are poor hence are unable to purchase the costly medicine. Pharmaceutical companies spent vast sums of money to create and market drugs, thus leading to the high pricing of the medicines to generate profits.
Generic competition risk. For the developed countries like the United States, the state has set aside strong patent protection laws, which enables the pharmaceutical companies to make a lot of profits. The patent has been facing a lot of competition from the generic companies which produce similar drugs hence dispatch them to the market for lower prices.
Competition from counterfeit drugs risk. The number of fake drugs has been on the rise, which is extremely cheap — the estimated amount of money collected from counterfeit drugs in $500b, which is collected annually.
Many countries have failed to regulate and ensure that the drugs that are being imported are of quality and good for use. Negligence has seen a lot of fake drugs been sold all over the world. Governmental negligence has caused pharmaceutical companies to incur a lot of losses.
- People need medications, but the poor often cannot afford them. Governments may not provide subsidies for health care and medications. Meanwhile, pharmaceutical firms focus their R&D on compounds likely to provide the best returns. What is the proper role of the following groups in addressing these dilemmas: national governments, branded pharmaceutical firms, and generic manufacturers?
The national government should set rules that govern the branded pharmaceutical firms and the generic manufactures in terms of pricing to prevent overpricing of drugs hence making it difficult for the less fortunate in the society.
The branded pharmaceutical firms should partner with non-governmental institutions for more researches to discover drugs for the notorious diseases like HIV and AIDS. The drugs should be given to the patients free of charge with the aid of the government.
Generic manufacturers should not try to compete with branded pharmaceutical firms. Generic manufacturers should lower their prices to accommodate the less fortunate.
- Consult www.phrma.org, The Pharmaceutical Research and Manufacturers of America. What steps is the branded industry taking to address the various ethical issues it faces, such as providing affordable drugs to poor countries?
According to pharmaceutical research, big pharmaceutical companies are willing to help people from underdeveloped countries to obtain drugs (Bond, 2019). Many big pharmaceutical companies are willing to discount prices in the underdeveloped countries, research on critical diseases affecting the poor states, and also conduct clinical trials.
- Consult the TRIPS agreement at the WTO portal (www.wto.org). What are the latest developments regarding this treaty? What types of protection does this treaty provide to pharmaceutical firms? What enforcement mechanisms does TRIPS provide for ensuring that these protections will be carried out?
2017, the WTO amended the TRIPS agreement that secures the underdeveloped countries a legal pathway to the access of affordable medicines under the WTO rules. The TRIPS agreement was made to provide protection and enforce all forms of intellectual property right, including those belonging to the patents (DiMasi, et al, 2016). For a pharmaceutical company to sales and marketing permits, they have to submit data proving the safety and quality of their product. According to the TRIPS agreement, in case of illegal trade or counterfeit medicines, or breaching of copyright privacy, criminal procedures and deserved penalty is put in order.
- Recommend a strategy that management at a large pharmaceutical firm should employ to reduce the likelihood of political and legal risks that such firms face. What steps should management take to minimize its exposure to such risks?
After discovering that you have invested your company in a country with political risks, it is advisable to purchase political risk insurance. I also recommend, before a company invests in a country, the management should research the riskiness of the country, through paying for reports from consultation specialists who make the assessments or do the research yourself using the free sources available from the internet.
References
Bond, E. W., & Saggi, K. (2019). Patent protection in developing countries and global welfare: WTO obligations versus flexibilities.
DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). Innovation in the pharmaceutical industry: new estimates of R&D costs. Journal of health economics, 47, 20-33.