$ 8 billion in fines but still suppliers

An article in USA Today (March 7, 2012) describes the $ 8 billion in fines paid by pharmaceutical companies accused of defrauding Medicare and Medicaid, but with no impact on their supplier status – thanks to them being sole suppliers for many drugs. The “corporate integrity agreements” with government does not impact their supplier status because of their patented drugs which are essential for Medicare patients.  Does their patented drug portfolio reduce the impact of the fines in preventing egregious behavior ? Given patent protection for their drugs, are there other schemes that could impact continued profits for such firms while maintaining required supply ? Should the penalties have been even higher than those imposed, to compensate for the continued supplier status – and the ability to cover the fines with increased product margins ?

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About aviyer2010

Professor
This entry was posted in Operations Management, Service Operations, Supply Chain Issues and tagged , , , , , , , . Bookmark the permalink.

One Response to $ 8 billion in fines but still suppliers

  1. Wow, what a difficult problem! How do you carrot/stick a monopolist to behave honestly with an essential product? About the only thing that comes to mind immediately is the fact that they are not playing a single game. The monopolist only has so many years of their patent, and a sequential game forces them to behave better. Withholding research funding and fines are about it. I’m filing this one away for long-term thinking.

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