Where Strategy and Ethics Converge: Pharmaceutical Industry Pricing Policy for Medicare Part D Beneficiaries

Journal of Business Ethics 84 (S1):75 - 88 (2009)

Abstract
On January 1, 2006, Medicare Part D prescription drug coverage was initiated. Concern was immediately voiced by the American Association of Retired Persons (AARP) and Families USA that, in response to this program, the pharmaceutical industry may raise prices for drugs most often used by the elderly. This article examines the ethical implications of a revenue-maximizing pricing strategy in an industry in which third party financing mitigates an end product's true cost to the user. The perspectives of three stakeholder groups are examined: the elderly, as consumers of prescription drugs, the pharmaceutical industry, as product manufacturer and beneficiary of derived profits, and the total U. S. population, as the ultimate payer for the program via tax revenues. Key questions explored include the relationships among price strategy and access to drugs at both the micro (Medicare cohort) and macro (total population) levels, and on drug development or enhancement. The role of profit in a capitalism-based health care system is also examined. Hospital industry impact on these same stakeholder groups in response to the original 1965 Medicare law is used to compare and contrast possible outcomes of the new drug program. It is predicted that pharmaceutical firms will mimic the hospital industry, adopting a price maximizing strategy for drugs covered by the program. In the process, a utilitarian effect occurs: the benefits of increased access and diffusion of drugs counterbalance inequities in financing Medicare Part D
Keywords access  diffusion  ethics  pricing strategy
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DOI 10.1007/s10551-008-9682-7
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References found in this work BETA

Priceless Goods: How Should Life-Saving Drugs Be Priced?Ian Maitland - 2002 - Business Ethics Quarterly 12 (4):451-480.
Priceless Goods: How Should Life-Saving Drugs Be Priced?Ian Maitland - 2002 - Business Ethics Quarterly 12 (4):451-480.
Ethics, Pricing and the Pharmaceutical Industry.Richard A. Spinello - 1992 - Journal of Business Ethics 11 (8):617 - 626.
The Struggle for The Soul of Medicare.Bruce C. Vladeck - 2004 - Journal of Law, Medicine and Ethics 32 (3):410-415.
The Struggle for the Soul of Medicare.Bruce C. Vladeck - 2004 - Journal of Law, Medicine and Ethics 32 (3):410-415.

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