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    Business Economics: Drugmakers Example

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    It was recently reported in a newspaper article entitled "Drugmakers gifts to doctors finally get scrutiny." The article stated: "Christmas trees, free tickets to a Washington Redskins game with a champagne reception thrown in, a family vacation in Hawaii, and wads of cash." Many persons might see this as bribing, but not it seems in the minds of many doctors.

    What do you think it is?
    Why do you think there is scrutiny at this time?
    Can you provide an economic explanation of why the practices described in this article occur?

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    Solution Preview

    A) Many doctors assume the pharmaceutical representatives are not bribing them, but thanking them for considering the drugs they offer. Doctors often have a choice of medications to use to treat patients and when the doctor chooses one over the other, the representative and the company make money. Not all doctors will choose the same medication or use the medication for many people. So, to thank the doctors, who are exposed to all types of medications for all different types of reasons, the rep offers them thank you gifts. Doctors also realize the gifts are incentives for good customers who regularly prescribe their products. They do not think of them as bribery because they do not prescribe medications just because they might get a trip, but to actually help a patient.

    B) The changes in drug plans and laws covering drugs including insurance and ...

    Solution Summary

    This solution discusses business economics.