Poverty affects people in many ways and one of them is the impossibility of buying required medications, which often reveal as too expensive in underdeveloped countries. In the following essay, I will explain why drug companies should establish policies aimed to reduce prices of such medications in needy countries.
First, drug companies establish prices in order to maximize profit but could still stay consistently profitable even if they decrease the price at a level which would fit the buying power of the people in poorer countries. With the price decreasing, the number of people who can afford the medicine would increase and the impact on the companies’ balance sheet could even be less than linearly proportionate to the decrease in price.
Furthermore, in an economy where Environmental, Social and Governance (ESG) criteria are becoming increasingly considered from the shareholders, such dedication could impact positively the confidence that investors have in the firm. Hence, this action would boost the image of the company and have a tangible impact on its stock price.
However, some issues need to be taken into account before such move. The company, supported by local governments should ensure that the reduced-price medicine will solely be sold and used in the agreed areas, avoiding at all cost possible for-profit illegal acts that could undermine the mutual trust between the two parties.
In conclusion, drug companies could reduce prices of their medications targeting countries in which needy people can not afford basic drugs while not affecting dramatically their overall profit margins and transmitting a positive image of themselves to the stakeholders. This decision must be supported by coordination with local entities that will ensure its successful implementation.