There is a life-saving drug for Hepatitis C (Sovaldi). It can cost up to $84,000

Question

There is a life-saving drug for Hepatitis C (Sovaldi). It can cost up to $84,000. There is one and only one provider of it. You are around the dinner table with your family this weekend and your family knows you have been taking Health Economics. Explain to your family what the issues are associated with why this drug costs so much, what the problems are with regulating that drug price, what would be lost and what would be gained if you did so, and what considerations are needed when examining this issue.

Explanation / Answer

As stated in the question, there is one and only provider of the drug hence making this market a monopoly market. A monopoly because of being seller of a good with no close substitute enjoys a lot of bargaining power. He can charge maximum price that he can to earn maximum profit. Thats one possible reason for this drug's cot being so high. Another thing is that this product is a public good, hence government would try to regulate the actions of the supplier. Government may give subsidy to the supplier that would may reduce the cost or may increase the access of drug to public. But the problem may comes of patent rights that the supplier would have been enjoying.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.