read and answer mentioned question Chapter 4: Ethics in Market Place (Page 212)“Drug Company Monopolies and Profits” being studied for1. Is the drug industry a good illustrationof the market theories described inthis chapter? Explain your answer.2. What changes, if any, do you thinkwe should make to U.S. drug patentlaws? Explain.3. How should the relation betweendrugs and human life/health affectyour views on drug industry monop-oly profits? Explain. revenues into research, they siphon off 17 percentits to cover the costs of research for new drugs. B2008, average drug company profit rates wersFinancial Reports, in the first quarter of 2007 ndAccording to the U.S. Census Bureau's Quartetypanies. Drug companies say they need these prof3 times the average for other manufacturing comin the first quarter of 2010, they averaged close toaverage for all other manufacturing companies, anddrug company profit rates were close to 7 times theing companies. In the first quarter of 2009, avegabout 3 times the average for all other manufadrug companies in the United States aregranted a patent on any new pharmaceu-tical drug they develop, which gives thema monopoly on that drug for 20 years. Not surpris-ingly, high monopoly profits (i.e., profits well be-yond the average rate of profits in other industries)are characteristic of the pharmaceutical industry. Ina 2003 study entitled The Other Drug War I, Pub-lic Citizen's Congress Watch noted that during the1970s and 1980s, drug companies in the Fortune 500had average profit rates (as a percent of revenues)that were double the average for all other industriesin the Fortune 500. During the 1990s, drug companyprofit rates averaged 4 times the average profit ratesof all other industries, and during the first 5 years ofthe twenty-first century, drug company profit rateswere about 3 times the rates of other industries.D.while drug companies put only 14 percent of theof their revenues into dividends they hand oshareholders and plow 31 percent into advertisingand administration. A study of drug manufacturing costs (see www.rense.com/general54/precehtm) found that prescription drugs have markups d5,000 percent, 30,000 percent, and 500,000 percenover the cost of their ingredients. The ingredients n100 tablets of Norvasc, which sold for $220, cost 4cents; of Prozac, which sold for $247, 11 cents: ofTenormin, which sold for $104, 13 cents; of Xanaxwhich sold for $136, 3 cents, and so on.

1. The market theory discussed during this chapter is that of the monopoly markets. The chief…

Answered: Drug Company Monopolies and Profits

Business

Economics

Drug Company Monopolies and Profits

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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