Pharmaceutical Industry Summary

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Economic analysis of the pharmaceutical industry This chapter includes an analysis of the pharmaceutical industry by using Schumpeter’s innovation theory in order to understand the motivations and actions of it. First, the incentives towards innovation of the medication will be examined and explained. This is important to understand because it demonstrates how the pharmaceutical industry operates in terms of creating and selling medication. The idea of an imitating society is also introduced and explained here in order to explain why the companies are competitive and the reason behind their imitation. In the second part of this analysis, Marc-André Gagnon’s (2013) journal article “Corruption of Pharmaceutical Markets: Addressing the…show more content…
According to Schumpeter’s theory, innovators are intelligent people who are able to change the economy by, among other things, creating innovations, and innovate practices. In the case of the research and development teams in each pharmaceutical company, the researchers are what Schumpeter defines as “the innovators.” Because the researchers are the ones that are developing the particular medication, they are the ones developing and producing the “innovation.” The medication is the produced innovation, and the pharmaceutical company is, therefore, as a whole the innovator. Schumpeter calls the innovator an entrepreneur, which is why one may argue that the pharmaceutical companies are the entrepreneurs. After the researchers belonging to the pharmaceutical companies (innovators) have developed the medication (innovation), the pharmaceutical company (innovator/entrepreneur) is responsible for getting the medication on the market (Hansen, 1951). Schumpeter also discussed the concept of new combinations. This concept can be used in correlation with the pharmaceutical companies, because innovations come from the process of finding new combinations, either in form of technological development or improvement. The pharmaceutical companies work the same way, by developing new ways or combinations to produce more medications, (Sweezy, 1943), which also will…show more content…
The article is concerned with the pharmaceutical industry and how companies within have created a business model that serves their opportunities of earning a profit. Gagnon analyzes how this business model is created through financial incentives, and how the dominant business model is promoting harmful practices. Financial incentives are here to be understood as a monetary benefit that motivates behavior and actions that might not have happened elsewise. Furthermore, he examines different ways of changing the business model in order to realign financial incentives, and thereby support and promote therapeutic innovation and rational use of medicine (Gagnon, 2013). However, the focus in our analysis lies on the pharmaceutical industry, their business model and the marketing within the

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