The market for Anti-Malaria Drugs
A graph showing the demand for anti-malaria drugs in Southeast Asia
How does the equilibrium change if counterfeiters enter? What is their marginal cost function?
Using a conventional scale to analyze equilibrium change, the entrance of counterfeit drugs will cause instability and therefore create a possibility of multiple equilibriums. Their marginal cost function will be negative (King, 1997, p. 272).
Contrast with Other Diseases
Malaria is a disease that is not communicable from human to human.
Does an infected individual choosing a fake anti-malaria drug to impose an externality on others?
No.
What if the disease were HIV/AIDS or tuberculosis?
Yes. In the case of HIV/AIDS and Tuberculosis, it is instructive to note that they are communicable. As such, without proper treatment or with the use of fake drugs, an individual stands a higher chance of spreading it.
Examine the cause of the problem and why it exists in some countries
Why does the problem afflict poor and developing economies?
This situation has persisted to these levels because of a number of factors such as poverty and lack of proper health care systems. Health issues affecting poor countries are numerous. To begin with, malaria presents major health problems to poor and developing economies. Many factors have caused an upsurge in malaria with explosive epidemics in endemic-disease areas in many countries.
These factors include population movement, climatic changes, and resistance to anti-malarial drugs. It is important to note that malaria transmitted by the Anopheles gambiae complex type of mosquito has its cause from Plasmodium falciparum (Olliaro & Taylor, 2004, p. 40). Efforts to control the spread of malaria in these poor nations have not been well coordinated. In fact, those efforts have been piecemeal. In order to be able to understand the epidemiology and of course how to handle this healthcare menace, vector dynamics, pathogenesis, and the socioeconomic aspects of malaria, proper strategies should be devised based on sound investment in research and development.
Such a strategy will aid in developing vaccines and anti-malarial drugs that can effectively counter this health issue. In addition, agencies or health organizations should work together and come up with research that is appropriate and practical to curb the spread of malaria (Newton, et al., 2001). That strategy can be used to plan, network, coordinate partnerships and as well as develop approaches that are innovative (Mankiw, 2009).
What government institutions or laws exist and how do they protect the consumers? Firms?
There is a myriad of challenges related to the demand for malarial drugs and the problem of counterfeit drugs. These interrelated and complex challenges demand an integrated, patient, and sustained response. The response by governments, non-governmental organizations (NGOs) working in poor and developing nations, and donor governments to health issues in South East Asia have been geared towards trying to ameliorate damages done by these diseases to economies, societies, and families (Newton et al., 2001, p. 1948). There is an urgent desire to mount prevention programs aimed at reducing the number of new infections.
To curb the spread of malaria and fake malarial drugs, Fogarty International Center (FIC) and the World Health Organization (WHO) among others have set up programs and projects to provide information on how diseases are spread and how they can be prevented through skits, lectures, posters, and the media. Additionally, they are working with the Division of International Science Policy, Planning, and Evaluation (DISSPE) among other agencies to fight against those who spread counterfeit malarial drugs (Olliaro & Taylor, 2004, p. 40). Besides, they have also established universal jurisdiction to prosecute them.
What problems exist on the demand side regarding whom consumers trust and the training of those individuals?
Demand for products arises when consumers trust the products or training of suppliers. However, demand for products can be affected by the presence of counterfeit products that sell at relatively low cost.
Patents – Government-Created Monopoly
When a company develops a new drug, it gets a patent. The government authorizes the creation of a monopoly. Why does it do this knowing that monopolies create a deadweight loss?
The government authorizes the creation of a monopoly to monopolize the drug market with its products (King, 1997, p. 272). In the long run, the incumbent firms in the market fail to make profits as dominant companies use their monopoly power to prevent them from getting profits. Eventually, companies enjoying monopoly power in the market makers and maintain supernormal profits (Narain, 2008, p. 2).
Potential entrants in the drug market face exploitation because of the asymmetry in cost existing between them and the incumbent firms. As such, incumbent firms enjoy a cost advantage and economies of scale over other companies that want to enter the market. Additionally, the government does this to block the entrance of other new drug suppliers and firms in the market (King, 1997, p. 274). It uses predatory pricing policies to lower or cut down the prices of its commodities. This eventually works to its advantage in securing market dominance and gaining cost advantages.
Ratings of Other Products and Services
There are other products or services that are also rated, by government agencies and by private firms. Describe another product or service that is rated by a government agency and by private firms
One of the products that are rated by a government agency is drugs. The ratings are made based on evidence that is scientifically proven on the potential harm in society and individual lives. For instance, the heroine’s rate in terms of danger is 2.75/3.
A private firm in the US such as Johnson and Johnson offers a variety of health products. According to the fortune 500 rankings, its health products have been rated at 103 (Narain, 2008, p. 2).
What characteristics do the government agency rate? What characteristics do the private firms rate?
In rating drugs, the government as well as private firms look at benefits or harm that the rated products have on society or individuals (Conner & Gierach, 1993, p 94). For instance, they look at the number of users of products, the number of deaths caused, and its dangers or benefits.
References
Conner, R. & Gierach, J. E. 1993. The drug debate. Web.
King, S. P. 1997. National competition policy. Web.
Mankiw, G.N. 2009. Principles of economics, Volume 1. New York: Cengage Learning.
Narain, J.2008. Malaria in the South-East Asia Region: Myth & the reality. Web.
Newton, P. et al. 2001. Fake artesunate in Southeast Asia. Web.
Olliaro, P. & Taylor, W. 2004. Developing artemisinin based drug combinations for the treatment of drug resistant falciparum malaria: A review. Web.