Market Structure and Determination of Market Price for Pharmaceuticals

MarketStructure and Determination of Market Price for Pharmaceuticals

MarketStructure and Determination of Market Price for Pharmaceuticals

Pharmaceuticalscan as well be known as medicines or drugs. What are they?Pharmaceuticals are unessentialconstituent of both contemporary aswell as outdated drugs [ CITATION Who14 l 1033 ].Itis of great importance that pharmaceuticals are harmless and real,not forgetting of good quality. They should be prescribed by amedical practitioner and be administered in a sensible manner.According to EPA, these are any product used by people for thepurpose of either health or cosmetic.Pharmaceuticals can as well beused by agroindustryto augment growth and the health of farm animals[ CITATION PPC14 l 1033 ].

Healthcaremarket is rather a complex field when it comes to market pricedetermination and market structure. It is much easier to comprehendthe extremes of perfect rivalry or pure monopoly than the in-betweencompromises in other markets than in health care market. Demand andsupply curve can easily be drawn to determine the market priceequilibrium in the markets. Health care market comprises of a numberof submarkets that have different levels of competition. Quite anumber of aspects of the health care industry are fundamental for themarket price determination. Furthermore, shifting the supply and/ordemand curves is important for determination of market price inhealth care.

Whenevaluating pharmaceutical business plan, it is of fundamental valueto consider the quantity of drugs against the market of the same.Some financial factors can shift the supply and demand curves, thuscausing one to reconsider business objectives [ CITATION Cry14 l 1033 ].Marketsize, price, employment, consumer tastes are some of the factors thatcan force a shift in demand curve. Fluctuation of prices can causeshifts in demand curve. If a firm increases a pharmaceutical price,customers will not be able to afford the commodity thus leading todemand fall. At the same time, if the price goes down, the commoditywill possibly sell so demand will be high and this will affect themarket price [ CITATION Cry14 l 1033 ].Demandcurve can also be affected by market size. This will take place whenthere is an overall in population growth. Pharmaceutical being a‘need’, there will be more demand for it if the population growsand starts climbing a class scale. This will cause the demand curveto shift and thus affecting the market price. Consumer preferencescan also affect the demand curve in a great way. Changes in consumerpreferences and tastes can affect how high demand will be for aproduct, thus causing the curve to shift in either direction.Peoplealways have a tendency of going for what is trending. Even in basicneeds such as drugs, one will find that a population prefers acertain drug over the other. In this essence, commercials and directadvertisement can alter consumers’ tastes and preferences.Consumers will tend to go for a product that is most advertised justto feel the ‘goodness’ and to go with the trend. This will inturn shift both the demand and supply curves thus influencing marketprice. Monopoly is an important aspect of market price and it existsin the pharmaceutical submarket. Monopoly can shift both the supplyand demand curve. In most cases, monopoly is the price maker so itcontrols the market thus shifting both demand and supply curve. Forinstance, if there is just one company that produces pharmaceuticalproducts, and the drug that the firm produces is a necessity to thecommunity, the firm can either increase or decrease prices of thatdrug thus shifting the supply curve. In this essence, the consumerswill not have any option than following the prices thus shifting thedemand curve. Regardless of whether the prices are high or low,consumers will still buy the product since they need that product. Inall these, the government policies play a major role in market priceas it affects the demand and supply curves. Governmentdecisions determine the demand for health care services and products.Governments do not take prices as given. In some cases, thegovernment sets rates for particular actions, and health careproviders respond. In other cases, the government is involved innegotiations. This is mostly experienced with pharmaceutical firms,for instance [ CITATION Who14 l 1033 ].

Thefactors that could have the most significant influence on how thesupply or demand curves could be shifted are price fluctuation,government policy, tastes and preferences, monopoly and market size.


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Who. (2014, November 9). Pharmaceutical products. Retrieved from Pharmaceutical products web site:

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