Do grey marketers serve useful functions for either consumers or manufacturers?

Answer 1

you are being generous on your title black marketing is what i think you mean which while not illegal because the law is slow to catch up on to days problems . it comes down to supply and demand and the fact thee people seem to know where to get the items before anyone else. they must serve a purpose because people keep using them

Answer 2

Many of the most advanced medicines in the world are developed and produced by American companies. These companies develop their products with the idea of selling them to US consumers based on an established market price, through distribution channels with which most of you are familiar.

In many third world countries, if they are not able to get the medicines for less, they will be cost prohibitive. People will die for want of life-saving medication that they simply cannot afford. In this case, both the pharmaceutical company and the needy patient are in a lose-lose relationship.

This means that major US pharmaceutical manufacturers will not be able to sell their products at prevailing US prices to these third world markets. They either have to find a way to lower the price, or just not sell altogether. And there are repurcussions of pricing out developing nations altogether. Emerging patent regulations have allowed poor countries to duplicate certain life saving medications when they are too expensive to purchase from the manufacturer (see http://www.sfgate.com/cgi-bin/article.cgi?f=/chronicle/archive/2003/10/25/MNGAB2J9SP1.DTL&type=health).

If the manufacturer views the third world business as 'incremental', 'break-even', or 'not core to the existence of the company as a profit making entitiy', it can sell products at or slightly above cost, if it is intended to be used in these countries where the product might otherwise be unobtainable. However, like anything where there is a bifurcated pricing structure, the people paying the higher prices want to obtain the lower prices, even if they are not in the intended circumstance of those getting the lower prices. It's natural human desire. So this is 'the will' to create the grey market.

The pricing structure of pharmaceuticals is highly driven by the research and certification process. Average estimates for a major pharmaceutical company like Pfizer, Amgen or Merck to certify a drug through the FDA process is $800 million. So lets say a pill or an injection costs $1 per dose foe the company to manufacture. With the FDA process, if they sell 10 million doses, they would need to charge $1 to get their manufacturing cost back + $80 to recoup their certification cost. This would make the cost of a $1 drug $81, before we start thinking about profit.

When you look at diseases which are rarer and they can't sell 10 million doses, you begin to understand how the prices are so high.

In the developing world, they can get a chemist to copy the composition of a particular drug. So maybe they can replicate the drug for $2 per dose, which is a life-and-death difference from $81 per dose when you consider the research and certification costs.

So, in this case, what would you do if you were the drug company? You would probably try to come up with some kind of pricing system where people in the developing world pay less, and people in the US pay more. That's what many of the drug companies do.

Of course, the US consumer is focused on the best deal. So if the consumer can find these drugs through alternate outlets overseas, using the internet and other sources of information to find these drugs, then the system will face difficulty. The fact of the matter is, the industry has a problem. Either the prices for medications will be established at the same price worldwide, thereby effectively pricing out many in the third world, or the pricing becomes 'multi-tiered', with market forces existing on the margins to get benefit in whatever manner possible.

So, for the rhetorical question. As a participant in the marketplace of medical treatment, how do you want to act? Do you want to press the edges, taking advantage of the problems of servicing the third world in order to get the maximum discount possible? Or will you pay more (even if you buy generics through the domestic channels), thereby facilitating the manufacturer's dual pricing scheme but knowing that this comes out of your pocket?

Answer 3

I guess the consumers that buy grey marketing products are happy and the manufacturers make money so I guess they serve a function.