ESSAY about something in economic

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Applying Economic Concepts to the U.S. Pharmaceutical Drug Industry

It is no secret that the U.S. Pharmaceutical Industry is one of the most hated industries in America. It went from being one of the most profitable and admired industries to its present unfortunate state. From the insanely high drug prices to the seemingly untrustworthy companies that make up the industry, the general public has acquired a bad taste for the pharmaceutical drug industry as a whole. There are many economic concepts such as fiscal policy (taxation and government spending) and GDP tangled within the industry that offer an explanation as to how this negative opinion came to be.

Pfizer is one of the world’s most premier biopharmaceutical corporations, founded in 1849 and headquartered in New York City. The recent news about this pharmaceutical giants proposed move from Washington to Ireland has caught the nation’s, as well as my attention. This move will cut the company’s tax liabilities, more specifically the daunting corporate tax, which was 29.2% in 2011 and has only risen since then (ProCon.org). Therefore contributions to the United States Treasury will decrease. These tax changes fall into the category of fiscal policy, which deals with government taxation and spending. According to Gardiner Harris with The New York Times, in response to corporate decisions like Pfizer’s to relocate, “Mr. Obama’s Treasury Department has twice changed tax rules to dissuade such ‘corporate inversions,’ and Republicans and Democrats alike have pressed for a tax-code rewrite to thwart them.”

Government spending is a part of fiscal policy as well. A recent controversial, large government expenditure is President Obama’s Affordable Care Act. This is of significance because part of the reason so many people loathe the pharmaceutical drug industry is due to the ridiculously expensive drug prices, which the government’s immense spending on Obamacare is supposed to help make more affordable. To illustrate the extreme prices, a 62-year old drug went from $13.50 per tablet to $750 overnight. In addition, the average cost of a cancer drug is $190,217 annually (New York Times). At these prices, families are being forced to choose between depleting their life savings or surrendering to their diseases. The government recognizes this and has attempted to aid with the Affordable Care Act, but these large government programs mean lots of government spending. Where does the government get it’s money from? From taxing the citizens of course! Fiscal policy is basically a full circle and the healthcare program may hurt most Americans more than help.

Also important to point out, is that since the corporation is moving out of U.S. borders it will negatively impact the United States’ Gross Domestic Product (GDP). We know the GDP measures the approximate total income of the country’s economy and economic well-being, so therefore a company now producing outside of the United States will not contribute to the United States’ Gross Domestic Product, essentially decreasing it. One may assume that one sole corporations exit won’t hardly affect the U.S. GDP, however Pfizer’s move is part of a trend. America is seeing more and more corporations decide to make the same move across borders. In 2011, corporate profits made up ten percent of U.S. Gross Domestic Product, a fairly large chunk in the scheme of things, so these corporations exits are really hurting our country.

Macroeconomic concepts can be found and explained in so many things in our daily life and in the media. Pfizer’s move to Ireland is a prime example of this. Take time to relate class material to current events, such as this, and the information will truly sink in.

Sources:

“Does Lowering the Federal Corporate Income Tax Rate Create Jobs?” ProCon.org. 3 March 2014. Web. 27 November 2015.

Harris, Gardiner. “Pfizer’s Plan to Leave U.S. Unsettles Drug Lobbyists.” New York Times. 25 November 2015. Web. 26 November 2015.