DRUG COMPANY

MONOPOLIES AND PROFIT

Created by : 1. M. Reza Ariansyah
2. Pingky Ongkowidjoyo
3. Riana Purwadani

CASE STORY THE TRUTH

US DRUG
Companie
s
In
In 2003,
2003, Study
Study
Public
Public
Confference
Confference
Watch
Watch noted
noted

Granted
Granted a
a patent
patent on
on any
any
new
new pharmaceutical
drug
drug
Monopoly
Monopoly For
For 20
20 years
years
Take
Take more
more average
average high
high
monopoly
monopoly profits
profits than
than
other
other industries
industries
Double
Double profit
profit average
average
rate
rate for
for all
all other
other
industries
industries in
in the
the fortune
fortune
500
500

According
According U.S
U.S
Census
Census Bereau
Bereau
Quartely
Quartely Financial
Financial
Report
Report in
in 200720072008
2008

in
in 2007-2008,
2007-2008, (1stst quartely)
quartely)
Average
Average profit
profit were
were about
about 3
times
times the
the average
average for
for all
all
manufacture
manufacture Company
Company

In
In 2009
2009

Average
Average profit
profit were
were about
about 7
times
times the
the average
average for
for all
all
manufacture
manufacture Company
Company

In
In 2010
2010

Average
Average profit
profit were
were about
about 3
3
times
times the
the average
average for
for others
others
manufacture
manufacture Company
Company

THE TRUTH DRUGS

COMPANIES
Cost
Cost of
of new
new
Drugs
Drugs

14%
14%
R&D
R&D
17%
17%
Dividend
Dividend
31%
31%
Administrati
Administrati
on
on and
and
Adverstising
Adverstising

DRUGS
DRUGS Companies
Companies have
have markup
markup their
their cost
cost of
of
ingredients
ingredients over
over 5.000%
5.000% -- 500.000%
500.000%
U.S
U.S have
have no
no rational
rational system
system for
for managing
managing
prices
prices of
of drugs
drugs -- CNN
CNN

Data & Information In 2014 (Facts on

the Pharmaceutical Industry in the
U.S.)
Overview

Values

Total nominal spending on medicines in the U.S.

$374 Billion

Pharmacy and drugs store sales in the U.S.

$ 236.17
Billion

U.S. Pharmaceutical preparation manufacturing

gross output

$ 156,565
Million

U.S. Biopharmaceutical goods export volume

$54 Billion

Companies

Values

Johnson & Johnsons total revenue

$70,1 Billion

Pfizers total revenue

$48,85 Million

Merck & Co. total revenue

$39,498
Million

Miscellaneous

Values

Spending of the U.S. Pharmaceutical industry for

research and development as a percentage of
total revenues

17,9%

Main Issue

Kebijakan paten yang ditetapkan membuat konsumsi obat berada di

dua persimpangan yaitu hak manusia untuk sehat (hidup lebih baik)
dan kepentingan perusahaan untuk mencapai profit

Flow Paten Obat

New

Paten 15 -20 tahun

Obat Originator

Obat Copy / Generik

Obat Merek Dagang

Alasan US memberikan Paten (Monopoli) untuk Obat-Obat baru

Memberikan
Memberikan insentif
insentif bagi
bagi perusahaan
perusahaan obat
obat untuk
untuk
melaksanakan
melaksanakan penelitian
penelitian
Sebagai
Sebagai biaya
biaya riset
riset

Problem Statement
Is the drug industry a good illustration of the
market theories described in this chapter?
What changes, if any do you think we should
make to U.S. Drug patent laws?
How should the relation between drugs and
human life/ health affect your views on drugs
industry monopoly profits?

Conclusion
Case study can explain the market
theories well.
Suggestion from Senator Bernie
Sanders allocated 0,55% from
GDP U.S (80bn/ Year) for buying
patents
The drug companies did mark-up
COGS (ingredients) too high.

Recommendation
The drug companies in oligopoly
market should do ethics more in all
business activity.
The Government as a regulator should
improve monitoring process in all part
of business activity (R&D, availability
raw material, production process and
distribution) in an ethical standpoint.
The Government should evaluate the
grant of the patent sustainably.

Thank you