PRACTICES OF EXCELLENT COMPANIES IN THE AMERICAN DRUG INDUSTRY

When one considers excellence in the pharmaceutical industry one might focus attention on the primary manufactured product, drugs. Emphasis would be placed on how the drugs are developed, tested for safety, and manufactured. Other factors could include marketing and distribution of these pharmaceuticals. These practices although extremely important, represent a very traditional view of drug companies. In other words drug companies primary business is to develop, manufacture, and distribute drugs. Starting in the mid 1980s most drug companies viewed themselves this way. When the medical inflation rate soared to over 15% year after year, most drug companies arbitrarily raised the price of their drugs at this extremely high rate. At the time, despite pleas from consumer groups, the pharmaceutical industry justified these increases by pointing to the high cost of research and product liability. The recession of the early 1990's has had profound effect on health care costs. As businesses look for ways to cut costs in general, they no longer will tolerate constantly rising health care insurance premiums. The election of Bill Clinton in 1992 further accelerated cost cutting trends in health care. This effect stemmed from the threat of nationalised or other radical health care reform. President Clinton in fact, singled out the drug companies for price gouging. Since this time, medical costs, including drugs has declined to approximately 5%. Cost containment efforts such as HMOs and managed care have continued.