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The pharmaceutical market is one of the most potent market in the world with a high potential of changing the economy drastically in a positive way. The market structure of pharmaceutical industry is an oligopolistic competition. This means that the market is consisted of very few companies operating. Why has India been dubbed as the ‘pharmacy of the world’? Why are the medicines so cheap in India? It is because of India’s patent law that helps its billion citizens to have access to the medicine as health of the workforce is important and inelastic so it helps contribute to the growth rate of the economy[2]. Other countries have a much higher percent of newer drugs launched than in India, this is because of the high prices that are charged leading to more engagement into research and development. As mentioned by one of my Peer’s, Pornnapphan (Proud) Channara[3], use of technology is rapidly increasing and that is one of the causes of globalization, and several countries like the USA have access to greater technology that is used to manufacture medical drugs that leads to lower costs and more growth opportunities in this industry. When comparing, USA charges almost 60 times the price for a medical drug in comparison to Indian pharmacies and therefore spends a higher percentage of the profits in research and development[4].

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Even if the government of India wants to import medicines from for example USA, the medicines have to cross hurdle of FDA (Food and Drug Administration) approval which Indian and other countries’ legislators also follow. Due to USA’s patent law, which gives incentive to the firms for profit, various new drugs are researched and released to the public market within 2-3 years. However, for the same drugs to either get imported or manufactured in India, it takes around 5-6 years. Nevertheless, the Indian Government has proved that it places the value of health over profit.

Despite the patent law and FDA approval hurdles, Indian pharmaceutical companies have stable, rising profits; although not enough to sustain the competition from foreign countries, however, India is still one of the largest provider of common drugs worldwide with the Indian generics accounting for 20 percent of total exports of the world in terms of volume[6].

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Therefore, government has to decide how to balance these two profound goals, of regulating costs versus increasing access. India isn’t rich enough to have it all, to be able to pay full price for all the advanced treatments while giving medical care to most of its citizens. India’s situation serves as a reminder of how expensive and cheap prices of drugs have drastic impact.

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[1] “The Current State of Pharmaceutical Logistics.” DSV Global Transport and Logistics, www.nl.dsv.com/NL-Market-Monitor/NL-The-Current-State-of-Pharmaceutical-Logistics.

[2] Ubel, Peter. “The True Cost Of Low Drug Prices.” Forbes, Forbes Magazine, 5 Jan. 2015, www.forbes.com/sites/peterubel/2015/01/05/the-true-cost-of-low-drug-prices/#7a2526541e75.

[3] “Pornnapphan (Proud) Channara | Just Another UBC Blogs Site.” Pornnapphan Proud Channara, blogs.ubc.ca/proudpchannara/

[4] www.ETHealthworld.com. “The Pill That Costs $9,000 in US Sells for $70 in India – ET HealthWorld.” ETHealthworld.com, 7 Feb. 2016, health.economictimes.indiatimes.com/news/pharma/the-pill-that-costs-9000-in-us-sells-for-70-in-india/50890307.

[5] “We’Re Douglas, the New Zealand Pharmaceutical Company with World-Class Capabilities.”We’re Douglas, the New Zealand Pharmaceutical Company with World-Class Capabilities – Douglas Pharmaceuticals, www.douglaspharmaceuticals.com/en/.

[6] “Brand India.” IBEF : India Brand Equity Foundation, www.ibef.org/industry/pharmaceutical-india.aspx.

[7] GTI Media – Malaysia’s leading graduate careers and education media provider. “Pharmaceutical Processes.” Coursesmalaysia.com, coursesmalaysia.com/article/pharmaceutical-processes.aspx.

 

 

In this case, Avocados, these are fruits that are very healthy but also extremely bitter yet they have hit high record prices due to high demand and scare supply. As stated, the supply of avocados has decreased from 360,000 trays per week to 100,000 trays per week because of rain.

Similarly, the article[1] states various reasons for increase in demand. There is a boost in demand of avocados due to the marketing and health campaigns. People have also become health conscious. Due to an increase in demand and fall in supply, the prices of avocados increased.

Image 1: Avocado

Due to the marketing strategies and health campaign there has been an increase in demand, however there is a decrease in supply because of rain, indicating an increase in price and decrease in quantity demanded.

During the summer, due to unsuitable weather conditions, the production of fruits is likely to decrease in Australia, which causes them to import avocados from Western Australia and New Zealand[2].

Image 2: sign outside a café

This is an import expenditure, and this transaction is recorded in the current account section of a country’s balance of payment. In this situation, Western Australia and New Zealand’s avocado producers are likely to benefit as the demand for their goods increases. Australian avocados producers incur a fall in revenue, and hence income. Avocados, being a unique fruit and having no close substitutes has a high demand. Also, that they cannot store avocados as they are perishable good, So, changes in price, will not cause an immediate change in the supply of avocados.

Increase in demand for avocados was essentially due to the promotion and marketing done by the Avocado Australian company, when they started using social media to promote avocados, they also created videos that had unique recipes using avocados which was one of the strongest strategy till date[3].

Image 3: Screenshot from one of the recipe’s provided by Avocado Australian company

This shows how important marketing and promotion is in today’s world and the role it plays in order to receive higher profits or demand in this case, even though the prices have increased consumers are willing to pay these high prices in order to satisfy themselves.I feel that any product or service can attain increased demand if the product or service has been marketed in the right way and at the right time.

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[1] Webster, Lara. “Avocado Price Rise Driven by Scarce Supply and Increased Demand.” ABC Rural, Australian Broadcasting Corporation, 19 Jan. 2016, www.abc.net.au/news/rural/2016-01-20/australian-avocado-prices-hit-record-highs/7099046.

[2] Slezak, Michael. “The Great Avocado Shortage of 2016 Looks to Be Toast as Fresh Harvests Ripen.” The Guardian, Guardian News and Media, 13 Feb. 2016, www.theguardian.com/lifeandstyle/2016/feb/14/avocado-prices-about-to-fall-from-their-7-high-to-the-usual-2-or-3.

[3] Maree. “Australian Avocados Marketing Update.” Avocados Australia, www.avocado.org.au/public-articles/australian-avocados-marketing-update-5/.