{"id":23,"date":"2015-09-23T13:47:04","date_gmt":"2015-09-23T17:47:04","guid":{"rendered":"http:\/\/blogs.nd.edu\/the-science-of-being-rationally-irrational\/?p=23"},"modified":"2015-09-23T13:47:04","modified_gmt":"2015-09-23T17:47:04","slug":"pricing-in-the-pharmaceutical-industry-profit-driven-or-morally-motivated","status":"publish","type":"post","link":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/2015\/09\/23\/pricing-in-the-pharmaceutical-industry-profit-driven-or-morally-motivated\/","title":{"rendered":"Pricing in the pharmaceutical industry: Profit driven or Morally motivated?"},"content":{"rendered":"<p>Just recently, news broke of an american company, Turing Pharamceuticals, and its CEO Martin Shkreli increasing the price of the drug daraprim from $13.50 to $750 per pill.<\/p>\n<p>Our class discussed the practice that The New York Times reported on<\/p>\n<p><a href=\"http:\/\/www.nytimes.com\/2015\/09\/21\/business\/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html?_r=0\">Drug Goes from $13.50 to $750, overnight<\/a><\/p>\n<p>We first discussed the pricing decision and how revenue should rise given that this drug is fairly inelastic. \u00a0They question was then asked: If a firm&#8217;s organization structure is that of maximizing profits, is what Turing doing wrong?<\/p>\n<p>We watched the interview from Bloomberg next to see how the CEO positioned the price increase:<\/p>\n<p><iframe loading=\"lazy\" title=\"Ex-hedge funder who hiked AIDS pill cost by 5,500 percent says drug \u2018still underpriced\u2019\" width=\"584\" height=\"329\" src=\"https:\/\/www.youtube.com\/embed\/bCIMUn_WNz0?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>Reaction was mixed. \u00a0Some students agreed with the pricing decision and respected how Turing used the free-market system to maximize profits. \u00a0Others quickly pointed to the moral obligations of the firm to provide the drug at a fair cost.<\/p>\n<p><span style=\"text-decoration: underline\">Our discussion was marked with some very good insights\/questions<\/span>:<\/p>\n<p>Is it the moral obligation for the seller of the drug to vet the buyer of the drug?<\/p>\n<p>At what point does regulation in the pharmaceutical lead to all drugs being classified as necessities?<\/p>\n<p>What is the fair-profit price if no R&amp;D is being done and should we follow up on R&amp;D promises?<\/p>\n<p>What is preventing the company from investing the profits claimed to be earmarked for R&amp;D into another drug in a similar market setting?<\/p>\n<hr \/>\n<p>&nbsp;<\/p>\n<p>Students were quick to identify that this CEO has done the same price hike in a previous company, with no track record of producing any tangible R&amp;D.<\/p>\n<p><a href=\"http:\/\/www.independent.co.uk\/news\/people\/martin-shkreli-pharmaceuticals-ceo-who-raised-hiv-drug-price-by-5000-also-hiked-cost-of-pill-taken-10513645.html\">CEO hikes price of kidney drug by over 2000%<\/a><\/p>\n<p>Turing has since rescinded the price increase and has settled on a lower, yet to be disclosed, price.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Just recently, news broke of an american company, Turing Pharamceuticals, and its CEO Martin Shkreli increasing the price of the drug daraprim from $13.50 to $750 per pill. Our class discussed the practice that The New York Times reported on &hellip; <a href=\"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/2015\/09\/23\/pricing-in-the-pharmaceutical-industry-profit-driven-or-morally-motivated\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":2026,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[82595],"class_list":["post-23","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-elasticity-of-demand"],"_links":{"self":[{"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/posts\/23","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/users\/2026"}],"replies":[{"embeddable":true,"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/comments?post=23"}],"version-history":[{"count":1,"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/posts\/23\/revisions"}],"predecessor-version":[{"id":24,"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/posts\/23\/revisions\/24"}],"wp:attachment":[{"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/media?parent=23"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/categories?post=23"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sites.nd.edu\/the-science-of-being-rationally-irrational\/wp-json\/wp\/v2\/tags?post=23"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}