PHIL 270 Lecture Notes - Lecture 19: Price Gouging, Mylan, Best Alternative To A Negotiated Agreement
4 May 2018
School
Department
Course
Professor
Business Ethics
4.07 Lecture Notes – Price Gouging
Does the moral argument change between Munger and Big Pharma?
· Does his argument apply to the drug pricing situation?
Munger
· Natural disaster was the cause of scarcity of goods
· Ice becomes an essential good (something that is necessary for life; water, food, medicine, shelter in
general)
· Anti-price gouging – the supply of ice decreases
· People from other cities brought the ice and sold them at an illegal price (above 5% of pre-disaster
rates)
· Thesis: We should’t egulate pie gougig – prevents people from accessing resources
o Not a case of market failure
o A disaster and a market functioning normally – signaling supply and demand
o Regulation prevented the market functioning normally – resulted in less ice
· If you let the market function properly, the price will more quickly return to pre-disaster prices
o Due to increase in competition
o Supply increases
o The market is the fastest in signaling the price
· The transaction is also mutually beneficial – the buyers would prefer ice to no ice
· His euvoluntary exchange paper
o Conditions:
▪ Conventional ownership
▪ Conventional capacity to transfer
▪ Not coercive (physical)
▪ Not coercive in terms of disparate BATNAs
▪ Absence of regret
o If your BATNA is death, then the exchange is not euvoluntary
o Does this BATNA situation apply to big pharma?
o At soe poit, you’e o loge a tadig pate ho is eual i the sese that you a alk
away and still have choices)
· Pharma companies have been increasing the price of drugs – they set their own prices
· Steven Brill – Aeia’s Bitte Pill
· Zwolinski – makes the argument that the disaster is the problem and not the price gouging
· Big Pharma – CEO of Mylan that makes these epipens – the issue is not the increase of prices, the
problem is the healthcare system
o Epipen was the only one on the market – went from $100 to $600 per shot
o Increased profit margin for 8.8% (2008) to 60% (2016)
o CEO of Mylan 2012: $9M, 2016: $18M moral character of the CEO?
· Not the act of increasing price gouging that is oally og, hat e’e poleatizig is the oality
of the character
· CEO Martin Shkreli – CEO of Turing Pharma – increased drug prices
o 2015 – acquired a drug that was developed by another company
o Raised the price of an AIDs drug by 5000% - went from $13.50 to $750 per dose
o Argued that the act was legal, as a company it made sense, American healthcare system is
capable of absorbing the price
o People involved in the price hikes were very aware of the harms of their actions on such a
vulnerable groups
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Natural disaster was the cause of scarcity of goods. Ice becomes an essential good (something that is necessary for life; water, food, medicine, shelter in general) Anti-price gouging the supply of ice decreases. People from other cities brought the ice and sold them at an illegal price (above 5% of pre-disaster rates) If you let the market function properly, the price will more quickly return to pre-disaster prices: due to increase in competition, supply increases, the market is the fastest in signaling the price. The transaction is also mutually beneficial the buyers would prefer ice to no ice. His euvoluntary exchange paper: conditions, conventional ownership, conventional capacity to transfer, not coercive (physical, not coercive in terms of disparate batnas, absence of regret. Pharma companies have been increasing the price of drugs they set their own prices. Big pharma ceo of mylan that makes these epipens the issue is not the increase of prices, the.
