Predatory pricing is a risky and suspicious pricing method in which a product is set at a very low price. The intent of it is to push off the competitors from the market. The competitors or new innovators with the huge price discrimination cannot sustain the equal or lower cost thus they back out of the business on its own.
Nowadays predatory pricing is considered illegal under jurisdictions. Nevertheless, it’s difficult by the law to find out whether it’s a deliberate predatory pricing or a legitimate price competition. In India, as per the Competition Act, 2002 disregards the predatory pricing strategy under Section 4. To resolve the price elasticity on the drugs, the Indian government has made a body called the National Pharmaceutical Pricing Authority. This body is meant to deal with price fixation. It monitors the prices of decontrolled drugs and formulations.
Predatory pricing in the pharmaceutical industry
Predatory pricing in the pharmaceutical industry is egregious. The price elasticity is so high that the competitors find impossible to compete with it. Such barriers in the pharma sector put a halt on the research and development. Pharmaceutical companies don’t engage in finding something new because of the fear of invasive price strategies.
The trend is followed by many Pharmaceutical companies abroad. The branded drugs compete with the generic drugs. This price strategy was currently followed by Turing Pharmaceuticals for the drug Daraprim. The company raised the price to 5000% from $13 to $750. Daraprim was developed in the 1950s to cure toxoplasmosis, a kind of parasitic infection infecting many.
One another crucial predatory pricing was done by Valeant Pharmaceuticals. The drugs Isuprel and Nitropress which treat heart-related ailments were manufactured by Marathon Pharmaceuticals, but later they were bought by Valent. After the acquisition, Valeant raised the price of Isuprel by 525% and the price of Nitropress by 212%. Such high inflations have affected the pharmaceutical industry many times.
Impact of Predatory pricing
Predatory pricing is an awful act for all of us. The pharmaceutical companies that which carry out price discrimination are hated by the government as well as the public. The impact of it is undesirable. Below are the consequences of such price discrimination strategies:
- Limited or no research and development in the pharmaceutical industry as the innovators are too scared to indulge because of hefty losses.
- The common public suffers the most. They are unable to buy such high inflated medicines. Due to lack of treatment, they suffer from the disease and eventually face death. It somehow increases the mortality rate.
- The government is affected as the country’s health policy is at stake. The government has to look into it and sort out it as per the public’s interest. They have to bring out new price negotiation laws for the pharmaceutical industries
- The pharmaceutical company is banned from carrying out such high inflation price strategies. Their patent to manufacture, market and sale of the drug is cancelled.
Thus, all the pharmaceutical industry politics is an indirect danger for the common man. They are the one who can’t meet up the demand.