Question

A. The UpSmith Pharmaceutical Corporation announced the successful development of a vaccine that can prevent certain forms of cancer. The cost of each dose of the vaccine is inexpensive—as low as $1 by some estimates. The retail price of the vaccine per dose, however, is $100.

• UpSmith defends this high price as a way to recover research and development efforts connected with the cancer vaccine that spanned over 20 years.
• Is the firm correct in incorporating these R & D expenditures into the vaccine’s sales price?

Answer 1

When Compared to other industries, R&D expenditure in Pharmaceutical industry is very high.There are some cases where it took more than 10 or 20 years to develop a drug or vaccine. If high costs of Vaccines are reduced, then the companies need to make a drug at a loss. In pharmaceutical industry, it is very difficult to difficult with reduced R&D expenses. The amount spent in Vaccine R&D is directly correlated with Vaccine sales and that amount is always in danger of going down if the earnings per share go down with it.

So, In my views, it is correct to incorporate R&D Expenditures in to the vaccines's sales price.