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Can Hospitals Manufacture Drugs in the US?


News bulletins report a stunning statement coming from some of the primary healthcare providers in the USA. Having been fed up with unfair prices and obscene shortages of primary and basic medications, the representatives of four leading US health systems have announced plans for developing a not-for-profit drug company to free themselves from having to rely on for-profit pharmaceutical companies (Mole, 2018).

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The problem of expensive healthcare costs is one of the most prominent in the USA, and the current escalation of the situation is in no small part the result of unwarranted price increases from several pharmaceutical companies. Some of the culprits mentioned include Turing Pharmaceuticals, who have increased the prices for a generic drug named Daraprim by more than 5,000 percent (Mole, 2018). The purpose of this initiative is to force the drug market to drop prices and compete fairly by introducing a new force to destabilize the existing monopoly of a few large companies over the entire healthcare industry.

Pharmaceutics and Mankiw’s 10 Principles of Economics

Mankiw identifies 10 principles, through which any situation in the market can be explained and evaluated. These principles are as followed (Mankiw, 2015):

  1. People face trade-offs. In this scenario, the tradeoffs are exorbitant prices for the most generic drugs that are very easy to produce cheaply and en-masse.
  2. The cost of something is what you give up to get it. Pharmaceutical companies enjoy the position in which they can charge as much as they want because drugs are needed to save lives, and people are willing to give up money to feel better.
  3. Rational people think at the margin. The reason why the situation was allowed to escalate for so long is that because, in the matters of sickness, life, and death, neither the patients nor hospitals are allowed to think rationally – they need the drugs and they need them as soon as possible.
  4. People respond to incentives. In this scenario, the exorbitant prices served as an incentive for the major healthcare providers to consider the possibility of producing drugs by themselves.
  5. Trade can make everyone better off. The case with Turing pharmaceuticals objects this notion.
  6. Markets are usually a good way to organize economic activity. This model works for traditional markets, where customers have plenty of time to compare products and choose the most beneficial options available on the market. In healthcare, however, patients are often hard-pressed to buy the drugs they need to survive, which gives pharmaceutics companies an unfair advantage akin to a monopoly.
  7. Governments can sometimes improve market outcomes. Lack of government action, on the other hand, can lead to monopolies being established. The situation in the American drug market is an example of a few major companies conspiring to keep prices for drugs high.
  8. A country’s standard of living depends on its ability to produce goods and services. Not applicable to this case scenario. The USA is one of the leading drug producers in the world and simultaneously has one of the most expensive (and low-quality) healthcare systems available.
  9. Prices rise when the government prints too much money. Not applicable to this scenario, as the issue is with artificial prices increase rather than inflation.
  10. Society faces a short-run tradeoff between Inflation and unemployment. Not applicable to this scenario.

Are Non-Profit Pharmaceutical Companies Possible?

The pharmaceutical industry is a costly one. The reason why certain drugs cost so much is that clinical testing requires time and money which non-profits are not going to have. Thus, a non-profit venture would not be able to devise new drugs. However, what it can do is produce generic drugs and repurpose old drugs to treat certain diseases. Academic research is seriously considering the use of old drugs for non-profit medicine.

According to Cvek (2012), an old anti-alcoholic drug called Disulfiram has been effectively utilized as a non-profit remedy for cancer. These findings are supported by several other studies. Bertolini, Sukhatme, and Bouche (2015) have found that repurposing a large array of old non-anticancer drugs that have been found to have cancer-suppressing qualities is a very cost-effective option, as these drugs are well-researched, this requiring no expensive and time-consuming medical trials.


The information provided from the news article reviewed in this paper indicates that the issue with the expensiveness of American healthcare is largely connected to exorbitant prices created by greedy pharmaceutics companies. Research indicates that the initiative started by the major healthcare providers may succeed in reducing the costs of treatment and improve the overall health of the nation.

In addition to providing generic drugs, they could also repurpose old, inexpensive drugs, and produce them en-masse, while avoiding the necessity for clinical trials. The market is going to accept the initiative with open arms, as the existing situation, according to Mankiw’s analysis, is abnormal and causes need and distress in patients and doctors alike. The government’s inaction is also to blame for the escalation of the crisis. While performing this task, I learned about the possibilities of non-profit solutions to the American drug problem and the practical implementation of Mankiw’s 10 principles in a real-life situation.

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Bertolini, F., Sukhatme, V. P., & Bouche, G. (2015). Drug repurposing in oncology—patient and health systems opportunities. Nature Reviews Clinical Oncology, 12(12), 723-742.

Cwek, B. (2012). Nonprofit drugs as the salvation of the world’s healthcare systems: the case of Antabuse (disulfiram). Drug Discovery Today, 17(9), 409-412.

Mankiw, N. G. (2015). Principles of macroeconomics. New York, NY: Cengage Learning.

Mole, B. (2018). Peeved by price gouging and shortages, hospitals will now make their own drugs. Ars Technica. Web.

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