Keiser University Personal Protective Equipment High Demand in 2020 HW

I’m studying and need help with a Economics question to help me learn.

1. this is a very well organized and well written response. You seem to grasp the main ideas about elasticity. Now that you have applied the ideas to the market for medications, can you also apply it to the products produced at your work, or maybe to some of the products you buy?

*I have a PPE Company that is called Allied Protective Equipment Inc, in South Florida! and I would like the reply to be relevant to the PPE purchases and production of masks, gloves, gowns!

2. Since the consumers in the pharmaceutical industry do not have enough information about the quality of the products, doctors are the final decision makers about the drugs to be used. If patients who are end-consumers cover the entire cost of the medications themselves, medication consumption and expenditures decrease as they will be price sensitive. If the entire cost of the medicine is covered by the health insurance, drug consumption and expenditures increase as the price sensitivities of the consumers would disappear.

With the expiration of the patent period of medications that are under patent, generic medications, which contain the same active substance and qualify as an exact copy of the patented medication, enter the market. The introduction of generic medications into the market leads consumers who are sensitive to the price to generic medications. This shifts the demand function of the original medication manufacturers down and makes them less flexible (Frank, Salkever, 1997).

In countries where generic medications are developed, significant decreases occur in average prices in the relevant active substance market. While these decreases increase the opportunity of consumers to consume cheap medicines in free market conditions, they also provide significant budget savings in countries where health expenditures are made by public institutions.

In cases where the price determination is carried out by the regulatory authorities, it reveals that the generic medication market is not sufficiently developed and, more importantly, the presence of generic medications in these markets does not create any pressure on the patented medication prices (Frank, Salkever, 1997). The fact that there is no cross-price elasticity among the products that are fully substituted for each other is the clearest indication that there is no price competition in the pharmaceutical sectors in countries with strict price regulations. This also applies to price competition between patented drugs that have lower cross-elasticity, are not fully substituted for each other and contain different active ingredients.

There are sector-specific structural elements that make up the brand addiction in the pharmaceutical industry. One of these elements is that doctors, who are the most important decision-makers in prescription medications, prefer more in the patent protection process of patented medications due to the assurance of using them for a long time and accordingly, their effects are better known than the new drugs. Another factor is that, because doctors are insensitive to price, they do not prefer lower-priced generic medications, and because of the lack of cheap medication substitution applications at the pharmacy level, patients who are end consumers have to use the prescribed medications (Grabowski, Vernon, 1992).

References:

Frank, R.G.&D.S. Salkever (1997), “Generic Entry and the Pricing of Pharmaceuticals”, Journal of Economics and Management Strategy, Vol. 6, No.1.

Grabowski, H.G.& J.M.,Vernon (1992), “Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act”, Journal of Law and Economics.

*I am not sure about the first comment she made, I believe it is not true!