Drug Scarcity. What Will We Do?

According to the article, (Yukhananov.A., 2012, http://www.reuters.com/article/2012/06/01/us-drugs-shortages-idUSBRE8500K220120601)  Henry Ford Hospital based in Detroit is having a drug scarcity with the usage of approximately amounting to $100 million a year, the order of supply of drugs are normally tracked by automated systems that allow for quick reorders, but the automated system are created to help the hospitals to avoid purchases and storage of unused drugs, and does not work by when the next batch of drug stock to come in. To overcome this problem immediately at the mean time, pharmacies are using the traditional way with paper spreadsheets to track the stocks. This task takes several hours each day and therefore dropping the efficiency and effectiveness of the hospital. Generic drugmakers are improving and building new facilities to prevent future shortages. Somewhat shortages happen due to the rumours spreading about shortages of drugs, pharmacies tend to rush to stock up resulting into a larger shortage of drugs.

Scarcity is defined as human wants are unlimited due to the limited resources; it restricts our options and choices toward a product as we can’t have everything we want. There are two big economic questions, which are what, how and for whom the goods and services are produced which determines how do the choices end up? And promotion of the broader social interest makes the choices that people make in pursuit of their own self-interest? As for this article, the main focus is one of the economic question is what, how and for whom? The question what, we should produce goods and services where it is the objects that human value and produce to satisfy the desire of what human wants. Goods are basically physical objects whereas services are tasks performed for people.

Based on the article, due to the growing scarcity of sterile which are one of the most important drug in the medical line. In order to maintain or increase the efficiency and effectiveness, producing more sterile in advance or extra supply would help as supply can be increase as price is held constant therefore increasing the quantity supplied to reduce the scarcity of sterile. Shifting the supply curve from S1 to S2 where the price is held constant. This would help a lot to at least stop the current issue of the shortage of sterile.

 How is the next question. using the factors of production that are grouped into four categories which are land, labour, capital and entrepreneurship. Land is known as natural resources, labojur is the work time and effort that they devote themselves to produce a certain product or services for consumers, capital are the equipments used to produce the goods and services and lastly, entrepreneurship where organization of  labour, land and capital using human resources. According to the article, the generic drugmakers like the United States- based of Hospira Inc and an Israeli company, Teva Pharmaceutical Industries said they are building new facilities, an increase in technology as well as to increase their factor of production therefore preventing future shortages of sterile. But in the mean time, pharmacies are counting pills, asking around the neighbouring hospitals for extra supplies and searching the web for any disruptions of supplies.

The graph below shows the price ceiling, where the P* shows the legal price the government has set, where MB shows the price the consumer is willing to pay at Q* which the quantity the industry willing to supply. Deadweight welfare loss occur due to MB is more than P*, whereas at P*, the quantity demanded is more than quantity supplied thus shortage occurs. The reduction of price ceiling will help reduce the blackmarket activities, by easing on the legal restrictions as well as increasing the availability of the goods.

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For whom to produce the goods and services for, based on the article, basically for the patients who can afford to pay for the drugs or for those who really need them to recover from the sickness but this is not the main problem as for now the producers are to promote to social interest as not for self-interest. Self-interest is you think of that one choice that is the best one availability of yourself. As for social interest, a choice that leads benefit to the society and two dimensions of efficiency and equity which leads to fairness to the usage of fairness. The hospital will give the drugs for the social interest, as people need the drugs to survive from the current sickness that they are going through.

Price elasticity of demand is the measurement of how responsive of the quantity demanded with the change in its price with all other influences are held constant. When the quantity demanded remains unchanged when the price changes, Edp = 0, then the good is having a perfectly inelastic demand. When the Edp = 1, the good is having an unit elastic demand. Furthermore, Edp < 1, it has an inelastic demand. Whereas when Edp >1 then it is having an elastic demand where the change in quantity demanded is more than the change in price. But when Edp = ∞, quantity demanded changes by an infinite in response to a small price change.

Products like drugs tend to have a perfectly inelastic demand because based of one the determinants which is a necessities towards sick patients, and it is a matter of life and death as well as the health of one that concerns the most. No matter how much the price increases, the people will still consume the drug as people are afraid of death and sufferings. But not only the patients, hospitals and pharmacies will buy as well to run their business and also to help the society with the supply they can get.

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In a nutshell, the shortage of drugs in Detroit has really brought quite a big issue to the country as it is a necessity to the consumers, hospitals and also pharmacies. But so far no price increase in the drugs are told or given, so consumers can just go along with the price given now but the resources of the sterile is still under scarcity. As for now the government has to find supplies as to provide aid to those who needs the drugs as to wait for the generic drugmakers to build the new facilities and able to reduce the problem with the issue of drug scarcity.