Judy Lewent is the Chief Financial Officer for the Pharmaceutical company Merck Inc. She manages a tight ship with several employees, five hundred of them being on the financial team. The article is based in the 1990s, during the Clinton administration. The purpose of this analysis is to analyze the relationship between pharmaceutical companies and government policies. In Jonas’ introduction to the U.S Health Care system chapters 9 and 10 stated that the Clinton administration tried to help fill the gap in insurance coverage and improve the cost of pharmaceutical drugs. Being able to analyze and create a solution through situations like this is one of the most crucial tasks for Merck’s financial team. Utilizing methods such as “Monte Carlo which uses mathematical analysis to come up with a range of possibilities for a certain set of possible actions (Nicholas, 1994)” These methods are very important when dealing with unanticipated change like sudden governmental reform.
The government regulation that most effected the companies like Merck was Clinton’s introduction of a 15 percent reimbursement on prescription drugs for people on Medicare. In an interview with Judy Lewent she commented that this policy costed Merck 2.8 billon due to the government attempting to put a ceiling on the cost of prescription drugs (Nicholas, 1994). She goes on to discuss that governmental institutions putting regulations on pharmaceutical companies leads too many to be discouraged from undertaking high risk research projects. That this socialization of the pharmaceutical industry leads to a lack of research and development as companies try to preserve their profit margins. Utilizing her financial team, Judy Lewent decided to take on the risk in order to preserve her company’s competitive advantage. Ethically, Judy speaks on that without companies having the profit margin to take risk on research than the progression of the healthcare field slows, and the overall quality of the system decreases over time (Nicholas, 1994).
The complains that critics of the pharmaceutical industry put forward is that patent-protected drugs are kept at a high price and hurt the consumer over time. In today’s current system, the patent on a prescription drug is twenty years. Arguments can be made that after clinical trials there is 10 operational years of production and sale of the product before the patent expires. Critics state that these ten functional years lead to price gouging as the company capitalizes on its temporary monopoly on the drug (FDA, 2020). I believe that there is a common ground between the pharmaceutical company’s desire to be unregulated and the benefit for the consumer. This alternative would be a compromise of lifting the regulations on the cost of prescription drugs in exchange for the shortening of patent durations on newly developed drugs. This would allow for the natural competition of business to drive down the cost of drugs. This would also allow for companies like Merck to keep their advantage as companies would be encouraged to continue research and development in order to keep their competitive advantage over the rest of the companies in the market.
Overall, I believe that there is a middle ground that can be found between the pharmaceutical industry and government regulation. Ethically, they are both trying to improve the overall healthcare system. Merck Inc. is trying to increase the quality of the future of the healthcare system through research and development. The government is trying to cut costs and increase coverage. Forward thinking business leaders like Judy Lewent can create an innovation fostering culture within the businesses that exist free of regulations if they are willing to accept a more competitive and faster pace market. That in order for companies to be unregulated there needs to be a faster turnover of when competition can begin to drive the price down so that the consumer can benefit from this competition.
References
Center for Drug Evaluation and Research. (n.d.). Frequently asked questions on patents and exclusivity. U.S. Food and Drug Administration. Retrieved February 10, 2023, from https://www.fda.gov/drugs/development-approval-process-drugs/frequently-asked-questions-patents-and-exclusivity
Freudenheim, M. (1993, September 30). Drug companies feeling pressure of Clinton’s plan to keep their prices down. The New York Times. Retrieved February 10, 2023, from https://www.nytimes.com/1993/09/30/us/clinton-s-health-plan-drug-companies-feeling-pressure-clinton-s-plan-keep-their.html
Scientific Management at Merck: An Interview with CFO Judy Lewent. Harvard Business Review. (2014, August 1). Retrieved February 10, 2023, from https://hbr.org/1994/01/scientific-management-at-merck-an-interview-with-cfo-judy-lewent