Price Discrimination in Practice Essay

Open, View, and/or
Download this Document

Total Length: 700 words ( 2 double-spaced pages)

Total Sources: 3

Page 1 of 2

Case 12.1: Price discrimination in Practice1. Why do drug firms give discounts voluntarily?Drug companies mainly offer discounts in the form of rebates. In a rebate arrangement, the purchaser buys the drugs at the list price, but the seller later refunds the purchaser the rebate amount (Stomberg, 2021). In most cases, the rebate amount is tied to the volume of drugs purchased, purchase loyalty, prompt payment, and increased breadth of purchases (Stomberg, 2021). Therefore, drug companies issue them as a means to encourage purchasers to buy higher volumes and to incentivize them to remain loyal (Stomberg, 2021). Thus, ultimately, drug companies voluntarily offer discounts to make more money and increase their market share from their high-end products.Secondly, drug firms voluntarily offer discounts as a means to earn preferential treatment on the pharmaceutical formulary (Stomberg, 2021). A formulary is a list of preferred drugs developed using evidence-based medicine and the judgment of experts such as pharmacists and physicians (Stomberg, 2021). The formulary’s primary purpose is to encourage the use of effective, safe, and the most affordable medication as a means to improve or maintain quality care (Stomberg, 2021). By offering rebates, the manufacturer builds a relationship with purchasers, who can, in turn, use their influence to favour the manufacturer’s brand name over other competing brands.

Stuck Writing Your "Price Discrimination in Practice" Essay?

View All Our Example Price Discrimination in Practice Essay

Have A Custom Example Essay Written

Preferential formulary listing thus provides a means for the manufacturer to increase higher revenues and increase its market share.2. Why…

[…… parts of this paper are missing, click here to view the entire document ]

…two customer groups if they have different price elasticity. Individual uninsured persons have low responsiveness to drug price changes. Although they pay for their medical expenses out-of-pocket, the uninsured are less responsive to price changes because they still have to incur the costs by themselves nonetheless despite the price change. Insurance companies, on the other hand, are highly price sensitive and have the power to shift from one brand or drug manufacturer to another in response to a price change (Alhabeeb & Moffit, 2012). Due to their low price elasticity, uninsured persons are less likely to respond immediately to price increases and even if one switches from a brand, the effect of the change is minimal. For this….....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Price Discrimination In Practice" (2022, June 11) Retrieved May 22, 2025, from
https://www.aceyourpaper.com/essays/price-discrimination-practice-2177412

Latest MLA Format (8th edition)

Copy Reference
"Price Discrimination In Practice" 11 June 2022. Web.22 May. 2025. <
https://www.aceyourpaper.com/essays/price-discrimination-practice-2177412>

Latest Chicago Format (16th edition)

Copy Reference
"Price Discrimination In Practice", 11 June 2022, Accessed.22 May. 2025,
https://www.aceyourpaper.com/essays/price-discrimination-practice-2177412
   

Open, View, and/or
Download this Document
order custom essay example