Opportunistic Pricing, Essay Example

AZT is the product of Burroughs-Wellcome Company, created to treat AIDS-related illnesses and immune system problems. According to the case study, the product in the past three years has been extremely profitable for the company, and Burroughs-Wellcome has doubled its profits. However, the product has a high profit margin: 50-70 percent. The company is criticized for its pricing; the drug creates inequalities in the AIDS-affected population.

According to the article by Project Inform (1998), AZT is a clear example of opportunistic pricing. Further, Spitz & Wickham (2010) also state that profits of sales in the pharmaceutical industry are not completely consumed by research and development costs. While the books of Burroughs-Wellcome are not available in the case study, there are several regulations that prevent customers from being overcharged by companies. The cost of AZT does not reflect the affordability level of patients. The research of pharmaceutical companies created by Spitz & Wickham (2010, p. 25) concludes that “in the main result, pharmaceuticals make many times more money than everyone else, and they don‘ t spend that profit on R&D”. In the light of the research, it is fair to assume that this is true in the case of Burroughs-Wellcome, as well. State and federal regulations need to be tightened in order to prevent patient overcharging. Further, covering the cost of treatment from government funds would create a substantial deficit in the health care budget.

The company should create an open discussion regarding prices, costs, and involve organizations, the public, FDA representatives. Further, Burroughs-Wellcome should increase its transparency, sharing information about their financial commitments and research, development expenses. Finally, as Spitz & Wickham (2010, p. 27) state: a discussion should be created between the industry’s representatives and government agencies to prevent the abuse of free markets.

References

Project Inform. (1998) Opportunistic pricing: a new scourge, a new call for action. The Body. Retrieved from http://www.thebody.com/content/art5796.html

Spitz, J. & Wickham, M. (2010) Pharmaceutical high profits: The value of R&D, or oligopolistic rents? American Journal of Economics and Sociology, 2010.