Business Ethics

The Federal Trade commission is responsible for making sure that existing pharmaceutical companies are abiding by the correct laws that allow generic drug companies to enter the market. It would be very easy for larger drug companies to make it harder for smaller generic companies to enter the market and it is understandable why they would try and make this happen. The allowance of generic drug companies into the market makes it harder for the brand name companies to operate because of their equally efficient quality at lower more appealing prices.

There are several reasons why the drug maker would want to stymie generic competition in the marketplace; all of which are completely understandable. Generic competitors are direct competitors for the market because of the fact that they offer the same active ingredients and strength of the brand-name products, the same dosage form and route of administration, same labeling (except name), and the same potency and shelf-life at a significantly lower cost than the brand-name drug. (Park, n.d.) After learning this fact, it is easy to see why generic drugs make up 70% of the market and how much of a strong competitive factor they are for brand-name drugs. In addition to this factor, generic drugs have very low costs and overheads which mean these generic drugs are marketed at very low prices. The generic drugs are priced so much lower than the brand name drugs that most health care providers choose the generic drug makers as their choice of provider. When the generic drug makers enter the market it usually means one of two things; the name-brand drug maker must lower their prices in order to stay competitive in the market or they risk losing their total market share. When relating to the case at hand, the multinational pharmaceutical company risks losing out on $2.11 billion dollars along with the majority of their consumers. From a consumers’ point of view, generic drugs offer a relatively low cost alternative to these high priced brand name drugs.

Like with every other type of business or item entering the market place, generic drugs are subjected to several legal barriers upon entry. Some of these legal barriers are intentional and some are unintentional. The first and most important legal barrier that relates to the pharmaceutical industry is patent rights. Generic drugs are not able to enter the market place as long as there is still an existing patent for the brand name drug. When a specific pharmaceutical patent expires, generic firms are able to enter the market and begin selling an exact replica of the preexisting drug. A specific patented pharmaceutical gives the patent holder exclusive rights to manufacture and sell a drug for up to seven years within a specified market. (Barriers to entry, exit and mobility, 2009) Other legal barriers include licensing agreements, exclusive access to natural resources, and government policy. (What are the types of entry barriers?, n.d.) Although