Why the company would want to stymie generic competition
For novel brand-name prescription medications made by a company, generic competition is never welcome. In the first cycle that the drug is introduced to the market, it is accompanied by a generic competition (Edlin, Hemphill, & Kaplow, 2015). Consequently, the brand name medication will lose at least half of its entire market share. The price if the brand-name drug will also drop with the emergence of more generic companies that produce copies of the drug. On that account, any pharmaceutical firm about to encounter such a situation reserves measures to stagnate the entry of new companies into the market (Edlin, Hemphill, & Kaplow, 2015). Such a firm can even put up obstacles to transferring to other inexpensive upstarts because even a one-month delay in entry into this market can save a significant amount of money for the developers of the original drug; this is why the drug-maker would want to stymie the generic competition.
Legal barriers to entering the market
For the pharmaceutical sector, there exists several barriers to entry into the market. The first is government patents which hand the innovating company the right to be the only producer if a certain period for a maximum time of 20 years (Edlin, Hemphill, & Kaplow, 2015). Loyal advantage is another obstacle. As suggested by the term, the innovator of drug usually gains and preserves a first mover benefit because the quality of the generic drug is unknown and usually needs someone to use them first. The last barrier stems from control of a certain crucial input like an active chemical or ingredient.
Possible Ethical Dilemmas
The first ethical dilemma in the situation is the stymie process which potentially locks out millions of people from purchasing affordable generic drugs. Blocking out the competition means that the original drug maker wants to maintain an original price which is usually too high for most consumers. The second ethical issue stems from the quality of the generic drug. Due to the urgency of gaining some market share, the producer of the generic drug may produce a cheap knock off that is low quality; this places the wellbeing of the population at risk.
The Concern of Consumer Advocates
Consumer advocates might be apprehended with the market takeover since the merger of the two firms merging together can lad to a lack of options aside from this single entity. Therefore, if a customer is unhappy with a product or service from the firm, he/she has no alternative. Another issue is that of cost hijacking due to the company’s control of the industry.
Pitfalls that consumers have to deal with
The first pitfall is the lack of choices for consumers since such a merger would force a third company to match the prices of the merged companies to stay in the market. Secondly, the merge would develop an industry monster since such a merger would enable the companies to join hands to develop a cheaper or ineffective product (Edlin, Hemphill, & Kaplow, 2015). The public would not be able to do anything as the company has control of the market.
Ethical Dilemmas in this situation
The most significant ethical dilemma may result form the chances of discontent with the contract signed with the merged company. Either party might feel that they were misled into signing the contract as their firm would not gain as much from the merger as the other company; this would lead to divisions within the merged company.
Edlin, A., Hemphill, S., & Kaplow, L. (2015). Professors Update 2015, Antitrust Analysis.