Prices, total revenue, and market power

Drugmakers' Pricing Power Remains Strong  by: Joseph Walker Jul 15, 2016 Click here to view the full article on WSJ.com TOPICS: Pricing SUMMARY: Firms' ability to raise drug prices is firmly intact despite pushback from health insurers and scrutiny by U.S. lawmakers. More than two-thirds of the 20 largest pharmaceutical companies said price increases boosted sales of their biggest products in the first quarter. CLASSROOM APPLICATION: The article informs students about the difference between list prices and prices consumers actually pay. With regard to pharmaceutical pricing, one point is that negotiated prices may not be increasing at the same rate as list prices. QUESTIONS:  1. (Advanced) Critically evaluate the statement, "More than two-thirds of the 20 largest pharmaceutical companies said price increases boosted sales of some or most of their biggest products." 2. (Advanced) What is the meaning of the following statement? "Drugmakers' pricing power in the U.S. isn't absolute." 3. (Introductory) Why have shares of many drugmakers slumped this year? 4. (Introductory) Why is it difficult to accurately track pharmaceutical prices? Reviewed By: James Dearden, Lehigh University