Assignment 5: Health Care

The health care system in the U.S. and in the world is complex. As a health care administrative professional, you need to understand the full gamut of factors that impact this industry. Prior to beginning your assignment, go to the YouTube Website to view the video titled Pharmaceutical Industry in Transition: Dramatic Changes Ahead, How Will You Adapt? (2 min 32 s) located at

Write a ten to twelve (10-12) page paper in which you:

From the video, assess how regulations in the U.S. impact the claims and facts presented in this video. Hypothesize where you think the biggest opportunity will be for pharmaceutical companies.

Compare drug pricing practice in the U.S. to those of another country of your choice. Discuss your thoughts on these differences and similarities and the implications.

Research the career trends in health care related industries and make a prediction regarding which career will prove to be the most economically rewarding. Provide discussion regarding your position.

Experts suggest that pressures placed upon medical professionals, specifically, doctors, are resulting in a decline in interest in this profession. Discuss your position on this argument and propose a remedy to this problem that is logical and reasonable.

Provide a discussion regarding the role of health policies. Speculate how such policies will impact organizations over the next decade.

Reflect upon the work that you completed in this assignment and summarize what significant developments occurred for you.

Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the students name, the professors name, the course title, and the date. The cover page and the reference page are not included in the required page length.

The specific course learning outcomes associated with this assignment are:

Explain the major components of the U.S. health care system, their functions, and the relationships among these components.

Explain the impact that policy, social, and financial forces have on health care access and quality of care in the United States.

Use technology and information resources to research issues in health services organization.

Write clearly and concisely about health services organization using proper writing mechanics.

Grading for this assignment will be based on answer quality, logic / organization of the paper, and language and writing skills. Click here to view the rubric for this assignment. Thank you.


The healthcare system in the US is unique, complex, and massive in nature. Health care delivery can either refer to the major components of the health system, the provision of services to patients, or the process that enables patients to receive healthcare services. Unlike most developed countries that run national health insurance services, which ensures that all their citizens gain access to universal access, Americans do not enjoy this provision. Approximately 188 Americans are either covered under Medicaid or Medicare (Shi, 2013). The managed healthcare sector comprises approximately 930 preferred provider organizations (PPOs) and 540 licensed health maintenance organizations (HMOs). The US health sector is divided into four major subsystems that include managed care, military, vulnerable populations, and integrated delivery. The Pharmaceutical industry is one of the subsectors of the US healthcare system. The paper that follows will address the changes that continue to occur in the various subsectors of the US health care system.

The US pharmaceutical industry develops, manufactures, and markets drugs that are licensed for usage as medication. Companies operating within the industry are allowed to trade in medical devices, brand medications as well as generic medications. The operations of these companies are regulated by the law. There are a variety of regulations and laws that deal with patents, tests, marketing drugs, and quality assurance to ensure that the drugs are safe and efficient. The pharmaceutical industry is regarded as one of the important components of the US healthcare system. This sector is robust earning over 60 billion in patient revenue annually. The pharmaceutical industry is currently in its transition phase. There has been a decline in FDA drugs and a decline in branded drugs. The best selling drugs in the US are the generics. This might be because of the low cost of producing these drugs which make them cheaper than the branded drugs. As at now, the top 15 most prescribed drugs are dominated by generic drugs (Parvis, 2002).

Another significant change has been recorded in the area of pharmaceutical drugs pricing. There has been a shift from the physician prescriber model to the stakeholder payer model. This shift has caused interest to develop in the manner by which pharmaceuticals approach their decision as regards marketing and pricing of their products. Despite the changes that are occurring in the industry, the large pharmaceutical companies are expected to survive the turbulence occasioned by the changes and thrive. Most of the new products that will be introduced into the pharmaceutical industry will be generic in nature. A shift is expected to occur in research and development as small pharmaceutical companies venture into the markets. These small venture companies will take lead in the development of new products. Most if not all of the pharmaceutical companies will outsource their support services to cut down on the cost of operations and create more responsive companies (Parvis, 2002).

Mergers and acquisitions are also expected to occur in the industry as large companies absorb small companies to eliminate duplicate products in the market and establish strong product lines. The companies will also have to increase their spending on emerging markets by about 20% (Spatz, 2010). Pharmaceutical companies can also capitalize on the huge opportunities presented by the demands for affordable vaccines and medicines in the poorly developed countries. Generally, for the pharmaceutical companies to survive, they must adapt to the rules and regulations erected by the FDA. As the business evolves, the companies must also be ready for organizational learning.

The pharmaceutical industry is unique in the sense that it is influenced by a combination of extreme economics and extensive government control. The Food and Drug Administration (FDA) is an agency in the US that is charged with ensuring that the medicines available to Americans are safe and efficient (United States, 2005). The regulations imposed on pharmaceutical products have grown from zero to far reaching making pharmaceutical products to be the most regulated products in the US. The FDAs powers are enshrined in two pieces of legislations; The FDA Cosmetic Act of 1938 and Kefauver-Harris Amendments of 1962 (United States, 2005). The first law requires that drugs be proven safe prior to marketing, while the second adds the requirement of proof of efficacy before a drug is released to the markets (United States, 2005).

Despite the strict, extensive, and costly approval process, some FDA approved drugs have been found to harm some patients. Luckily, the manufacturers of these drugs chose to voluntarily withdraw them before they could inflict more harm. Kefauver-Harris Amendments of 1962 has also lengthened the period of time required for drugs to be approved for marketing. This delay in approval has been associated with unnecessary and preventable deaths. The introduction of the new amendment in 1962 reduced the number of new drugs entering the US market by 60% (Peltzman, 1973). Between 1963 and 2003, the number of newly approved drugs that entered the markets annually doubled at the expense of the research and development costs which increased by a factor of twenty (Peltzman, 1973). In order to deal with the long delays caused by the approval process, some economists have proposed that the FDA allows the manufacturers to make the drugs available even as the approval process proceeds.

The cost associated with the FDA approval process is another impediment that the pharmaceutical companies face. The cost of approving a single new drug is pegged at over $800 million. The period between the commencement and completion of the approval process may span up to ten years. This reduces the twenty-year patent denying the manufacturers the benefits of the full patent. This huge cost coupled with the long period taken to get a drug approved has led the drug manufacturers to price most of their branded drugs above their production costs. However, most of the manufacturers price their drugs differently depending on their customer segmentation. Some customers are charged higher prices while others are charged lower prices. For example, Merck sold its antiretroviral drug, Crixivan, to the poor countries in Latin America at $50, while charging the affluent American market $500 for a month’s supply of the drug (Peltzman, 1973).

Branded drugs are priced higher than generic drugs because of two main reasons. First, the cost of associated with the approval of a branded drug coupled with the duration of time taken for the drug to be approved imposes a high cost on the manufacturer. The only way to recoup the invested capital plus some profit is by pricing these drugs at high prices. Second, the ten years remaining on the patent after the drug has been approved is short and as thus the manufacturer must sell the branded drugs at high prices to recover their investment before the patent expires. On the other hand, generic drugs are not subjected to the stringent and costly approval processes that branded drugs go through. However, the generic drug manufacturer must prove that the generic drug has the same active ingredient and mode of action as the corresponding branded drug. For the generic drug to be approved by the FDA, the drug must be a bioequivalent of the branded drug (Epstein, 2011).

The decline in branded drugs might be attributed to the high cost and long FDA approval time associated with branded drugs. Conversely, the increase in generic drugs and their popularity in the US pharmaceutical markets might be attributed to their relative low prices. Generic drugs are best selling both in the US and global pharmaceutical markets. Some companies manufacture these drugs and sell them to poorly developed countries, which cannot afford branded drugs. The high demand for vaccines and medicines in poorly developed countries creates a ready market for generic drugs. Some companies also produce generic antiretroviral and anti-malaria drugs and supply them free of charge to the poor in America and beyond America. Large pharmaceutical companies that have the capacity of producing branded drugs are increasingly merging or acquiring the smaller innovative companies that produce generic drugs. This move eliminates duplicates in the pharmaceutical markets while at the same time increasing the capacity of the mother company (Epstein, 2011).

Big pharmaceutical companies have perfected the art of lowering their cost of production by outsourcing the biggest part of their support staff. These companies have realized that it is cheaper to outsource the support services instead of running an in-house support team. Additionally, the pharmaceutical companies have also resorted to outsource research and development to firms that have cutting edge technologies needed for the development of new products. Aside from outsourcing, the big pharmaceutical companies are also expected to benefit from the economic shift that is occasioned by the maturity of emerging markets. These markets are poised to be comprised of most of the middle level consumers who will be able to afford the drugs produced by the pharmaceutical companies.

The US pharmaceutical market uses a unique pricing model, which is regulated, either in a direct way or in an indirect fashion by both the State and Federal laws. These laws aim at making prescription drugs to be more affordable to government programs, as well as the vulnerable and senior populations. Critics argue that the US consumers of pharmaceutical products pay extra for the subsidies that these companies are offering the rest of the world. Others allege that there is cost-shifting whereby the retail buyers are paying extra because of the discounts offered to government purchasers and managed care organizations (Schweitzer, 2007).

Arguably, the US plays a major role in the innovation of drugs. The pricing strategy used by the companies in the US is based on a competitive structure, which is highly supported by the insurance companies. The market is not strictly controlled by regulatory authorities. This strategy has led to high use of new products, high prices for branded products, strong demand for generic products, and lower prices for the generic products. Pharmaco-economic studies have revealed that the generic drugs are not just cheaper than branded drugs, but also have slower price increments as compared to their branded bioequivalent. The drug prices in the US are 70% higher than in Canada. The pricing is not strictly regulated by the US government (Schweitzer, 2007). The prices are dependent on factors that include marketing and distribution, cost of research and development, demand for the product, perceived therapeutic outcome, and potential or expected profit. In the US the regulatory authority, the FDA’s primary concern is to check on the efficacy and safety of the drugs entering the markets. They do not interfere with pricing, the companies are free to set their prices at the levels they deem fit (Schweitzer, 2007)..

Contrastingly, the Canadian Federal government regulates drug prices. The Federal government is in charge of all intellectual property rights including the manufacture rights for drugs manufactured in the country. Additionally, the government oversees the initial labeling and approval of all prescription drugs, and ensures that the market is competitive enough. The provincial governments in Canada are in charge of funding all health care services, which include the purchase and acquisition of medicine. Drug price regulation is achieved by comparing the prices of the same drug in seven countries that include France, USA, Germany, Switzerland, Sweden, Italy and UK. Canada sets its price by taking the median of the prices from the seven countries. Additionally, the government compares the quality of the new drug to its equivalent in the markets. Canada also applies programs such as price cuts and reimbursements for costly drugs. All of these control measures enable the Canadian government to offer its population quality medicine at affordable prices (Schweitzer, 2007).

The differences drug prices between the USA and Canada is quiet big. Prescription drugs in the US are priced at 70% above that of Canada. This disparity in pricing has made the drugs in the US to be more expensive than in Canada. I think it is correct to assert that governmental regulation and control is necessary for the US’s pharmaceutical markets. Such a regulation would help to bring down the drug prices to a point or level where the majority of the population can afford to purchase the drugs. The two governments should also continue checking on the quality of drugs entering their pharmaceutical markets (Schweitzer, 2007).

According to an article dubbed “Health care workers will lead U.S. job gains to 2022” posted on the US Today website, it is estimated that the health care workers will constitute the biggest proportion of the employed Americans. This assertion is supported by the fact that the aging baby boomers will be checking out of formal employment and joining the retired population. This massive number of retirees will slow the country’s economic growth and contribute to an increase in the number of health care and social services jobs created in the US. This increased number of jobs stem from the fact that the aging boomers will require services that include home health aides, dental hygienists, occupational therapists, and physician assistants (Davidson, 2014).

Looking at the trends in the general population, it is accurate to argue that home health aides will be in high demand in the US. This assertion is supported by the fact that most of the baby boomers will be retiring and they will need professionals to care for them. The baby boomer population is the biggest portion of the entire population. This massive number of retirees will provide ready jobs for home health aides. Therefore, the home health aide’s job is poised to become the most economically rewarding career in the US (Davidson, 2014)..

The pressure leveled against medical professionals, particularly doctors has contributed towards the decline in interest in the profession. Traditionally, doctors enjoyed some sort of autonomy, prestige, and power, but since the advent of managed care organizations (MCOs), the situation has changed drastically. Many doctors employed through these MCOs are pressured by their employers to bring in revenue that will enable the employer achieve profit maximization. The pressures leveled against the doctor may either take the form of manipulation or control of the doctors’ expertise and knowledge. Professional decline of doctors will continue to be recorded in the future as a result of factors such as the gag clause, breakdown of doctor’s authority, and incentives to withhold or deny care (Marlow, 1997).

The new corporate structure of medicine threatens to erode the professional nature of doctors’ practices. Some doctors have lost the power and authority needed to conduct their trade in a professional way. Some of these doctors can no longer relay medical decisions or prescribe treatment without involving the MCOs. The gag clause enshrined in the managed care contracts prohibits the doctors from acting independently (Marlow, 1997). This clause tampers with the doctors’ autonomy and authority limiting what the doctors can or cannot tell the public and the patients.

Medical practice is founded on the tenet of altruism. This means that the doctors who enter the profession come in hoping to do all they can to help their patients. However, for profits Health Maintenance Organizations (HMOs) dissuade doctors from pursuing altruism by offering the doctors financial incentives as long as they reduce the services they render to their patients. THE MCOs followed the example set by the HCOs by establishing an incentive program to persuade doctors to reduce services. The MCOs chose to copy the HCOs incentive after realizing that its other approaches, which included penalties for overuse and administrative monitoring, were not working (Marlow, 1997).

 Some of the financial incentives are wrapped in the comprehensive packages given to the doctors. For any doctor to benefit from these incentives, he or she must be able to sacrifice his or her professionalism and accept the manipulation from the employer. The incentives might deter physicians from administering expensive test or cause them to significantly reduce hospitalization for patients. This reward scheme that causes doctors to do less for their patients presents a direct conflict of interest (Marlow, 1997). Additionally, such a practice disregards the tenets of professionalism, ethics, and morality upon which the practice is founded.

Another source of pressure and dissuasion is in the fact that the ability of HMO doctors to oversee and regulate their profession’s standards, education, ethical codes has been hijacked by the HMO. The HMO employed doctors’ performances are not judged on the basis of their professionalism and their provision of quality care. Instead, they are judged based on their abilities to cut cost and generate returns for the HMOs. Moreover, doctors working within for profit HMOs are unable to cooperate and form relationships with other doctors. This lack of relationships makes measuring quality of care and standardizing care impossible.

The gag rules enshrined in the contract signed by the doctor imposes constraints on the relationship that is supposed to subsist between the doctor and the patient. These rules take various forms. However, most of them restrain the doctors from discussing any alternative treatments with the patient. Any doctor who opts to disregard the rules may be reprimanded or in the worst case scenario, the doctor might face dismissal. Another gag clause prohibits the doctor from making any comment that would erode the patient’s confidence in the HMO. The third clause expressly prohibits the doctor from referring the patient to any facility that is not under the HMO. The doctors are also prohibited from recommending uncovered treatments. All these restrictions impose unnecessary pressures on the doctors making the profession unattractive to potential new entrants (Rodwin, 1995).

The pressures imposed on doctors can be reduced or eradicated in their entirety if a professional body such as the American Medical Association (AMA) would voice their concern in matters to do with corporate medicine. The AMA can work closely with likeminded organizations to encourage people to divest from HMOs and invest in portfolios that promote social welfare. Secondly, the AMA can lobby fort support and sponsor bills that aim at protecting doctors, patients, and other health workers from the manipulation and control of HMOs and MCOs. Thirdly, the AMA can flood the media with information on gag clauses and dissuade the public from attending HMO designated health facilities. Fourthly, the AMA can create a code of ethics that binds all HMOs and MCOs, and force these organizations to balance between medical ethics and business concerns (Swansburg, & Swansburg, 2002).

The health policies in the US place much attention on the financing of biomedical research and personal health care. Despite the fact that the US spends the biggest part of its budgetary allocation on healthcare, the Americans are neither satisfied by the health care system nor their own health (Barr, 2011). The results are unsatisfactory especially when it comes to addressing the health needs of the minorities, and in infant health and the quality of life. These health policies have failed to address the real challenges facing the US citizens. A drastic review of these health policies are necessary to enable them handle the challenges of the next decade.

Over the next decade, organizations are likely to be affected by the health policies. As the federal government moves to amend the health policies, most of the health service organizations will have to align themselves with the new policies. It is recommended that the policies the amended to include socioeconomic, environmental, and demographic factors that contribute to health outcomes. In the next decade, health service organizations and providers will have to explore the role of clean water, better housing and nutrition, pest control, improved waste disposal, and improved food safety in ensuring health outcomes. This effort to explore the broader determinants of health will necessitate a shift in the manner in which health organizations address matters related to health (Barr, 2011).

In conclusion, the health care industry will transit alongside its various subsectors. The pharmaceutical industry will continue to invest in generic drugs as it outsources its support services and part of its R&D. The drug pricing in the US will remain to be higher than the rest of the world. As baby boomers retire, they will lead to the creation of jobs in health and social services. However, the pressures imposed on doctors shall dissuade most students from enrolling into med school to become doctors. Finally, the health policies of the US must be changed to be able to cope with the demands and challenges of the next decade.


Barr, D. A. (2011). Introduction to U.S. health policy: the organization, financing, and delivery of health care in America(3rd ed.). Baltimore: Johns Hopkins University Press.

Davidson, P (2013). Health care workers will lead U.S. job gains to 2022. US Today.  Retrieved on 12/3/2014 from <>

Epstein, R. A. (2011). Branded Versus Generic Competition? A Kind Word for the Branded Drugs. Hastings Science & Technology Law Journal3, 459-470.

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Parvis, E. N. (2002). The pharmaceutical industry: Access and outlook. Huntington, NY: Nova Science Publ.

Peltzman, Sam (1973): An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments. Journal of Political Economy 81 (5): 1049–1091.

Rodwin, M. A. (1995). Medicine, Money, and Morals: Physicians’ Conflicts of Interest. New York: Oxford University Press.

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Spatz, I. D. (2010). Health reform accelerates changes in the pharmaceutical industry. Health affairs (Project Hope)29(7), 1331-1336.

Swansburg, R. C., & Swansburg, R. J. (2002). Introduction to management and leadership for nurse managers. Boston: Jones and Bartlett.

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