Case study. Market Failures and Pharmaceuticals

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Market Failures and Pharmaceuticals
Introduction
The higher and mushrooming costs of prescription drugs such as EpiPen, remains everyone's agenda. Drug prices continue to rise at an alarming rate, an aspect that is considered to have outpaced other areas of healthcare spending. However, it is not the prices of the new drugs as well as that of rare conditions that result in higher costs of prescription drugs. Pharmaceutical entities raise the prices for some of the commonly utilized medications that treat asthma and diabetes due to varied market failures. This audit, therefore, seeks to underscore the market failures that are associated with the increase in drug prices.
Market Failures and Pharmaceuticals
The government's involvement and engagement in the pharmaceutical sector remains extensive than in other markets. In this case, does not only the extent and the scope of the government's intervention in this industry matter but also its failures and limitations. The government has the capacity to inform, mandate, regulate, provide, and finance the pharmaceutical industry. As several government institutions take consideration of the need to change the established roles of the private as well as the public sectors, it is notable that the main underlying reasons for this aspect lies in the establishment of interventions that may be used in addressing the challenges that emerge within this industry, with this substantiated by the economic theory (Zuckerman 1756). The economic form of reasoning provides that in a perfect market, the willing sellers and buyers may need to be left to engage in business transactions without the interference of the government, given the fact that the market may provide an optimal solution to the issue. In this case, the required conditions in the establishment of a perfect market are often not met, with this forcing the pharmaceutical markets to plunge into market failures. In this regard, fundamental market failures within the pharmaceutical market mainly include
Informational Imbalances. Commodities such as food and grains, allow sellers to determine the quality of the products as well as their value for money before purchase. However, if one of the parties in that transaction knows much regarding the quality of the product, thus this may fail in the market (Engel n.p). Contrarily, in the pharmaceutical market, the quality of information, efficiency, safety, as well as the value for money in a product may vary among involved parties. This, therefore, reveals that information asymmetry or imbalances may result in a market failure within the pharmaceutical industry, hence a contributing factor to the rising prices of prescription drugs. As revealed, there is a need for patients or consumers to know less as opposed to the dispensers or the prescribers of the drugs (Zuckerman 1757). In several cases, most of the actors are often less informed regarding the quality and efficiency of a drug, thus presenting a virtual problem. This equally calls for consumers and prescribers to rely on the information provided by the manufacturers on the effects of a drug, with this posing a significant threat in most of the industries that are ...