Theentire process starts off with the pharmaceutical industry who is concernedwith the discovery, development and production of drugs. The drugs are moved accordingto the graph shown above wherein the distributors get it from thepharmaceutical company who in turn give it to different pharmacies. These drugsthen end up with the end patients who use these drugs according to the prescribedusage. This is based on the assumption that drugs are sold as perprescriptions. However, this tends to vary in different countries as differentgovernment have regulations that differ.
Alongwith the parties that influence the supply chain of a particular product, thereare certain influencing parties that play an extremely vital role in thisindustry. In certain economies, the government plays the role of an insurer whereinthe government reimburses the patient either wholly or partly. The samescenario applies to the insurance companies that function in a country. The reimbursementamounts are dependent on who is covering the patient’s expenses and under whatscheme does such expenses fall in. It would be noteworthy that these factorsvary from economy to economy. To make it easier for our reader, we will beassuming that both the government and insurance companies facilitatereimbursements on the basis of its type and degree of coverage. Hencewe say that drugs are price inelastic in this industry as most of the expensesare not covered by the patient themselves.
Toadd on to the list of influencing parties in the industry, doctors orphysicians are the entities that prescribe certain drugs or medicines to thepatient. Here we work on the assumption that there are many drugs that anindividual can’t get their hands on without the use of a prescription. Medicalprescriptions are extremely important, especially in developed countries sincethese countries are subjected to stricter regulatory measures.