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INTRODUCTION
A perennial ethical question for the pharmaceutical industry has been the aggressive pricing policies pursued by most large drug companies. Criticism has intensified in recent years over the high cost of new conventional ethical drugs and the steep rise in prices for many drugs already on the market. One result of this public clamor is that the pricing structure of this industry has once again come under intense scrutiny by government agencies, Congress, and the media.
The claim is often advanced that these high prices and the resultant profits are unethical and unreasonable. It is alleged that pharmaceutical companies could easily deliver less expensive products without sacrificing research and development. It is quite difficult to assess, however, what constitutes an unethical price or an unreasonable profit. Where does one draw the line in these nebulous areas? We will consider these questions as they relate to the pharmaceutical industry with the understanding that the normative conclusions reached in this analysis might be applicable to other industries which market essential consumer products. Our primary axis of discussion, however, will be the pharmaceutical industry where the issue of pricing is especially complex and controversial.
THE PROBLEM
Beyond any doubt, instances of questionable and excessive drug prices abound. Azidothymide or AZT is one of the most prominent and widely cited examples. This effective medicine is used for treating complications from AIDS. The Burroughs-Wellcome Company has been at the center of a spirited controversy over this drug for establishing such a high price--AZT treatment often costs as much as $6500 a year, which is prohibitively expensive for many AIDS patients, particularly those with inadequate insurance coverage. The company has steadfastly refused to explicate how it arrived at this premium pricing level, but industry observers suggest that this important drug was priced to be about the same as expensive cancer therapy.(1) In dealing with its various constituencies Burroughs has relied on two key arguments to justify this price: high research and development cost and the threat of obsolescence. Burroughs maintains that in order to recoup its oppressively high research and development costs for this medication it has no choice but to charge a price in the range of $6500 per year. The company also defends its pricing policy by noting...