HOW THE FREE MARKET MAXIMIZES PROFITS IN THE USA PART 2

The free market maximizes profits by increasing brand name drug prices as much as the market will bear every year.

As shown in the plot below the x-axis represents the number of drug companies selling each drug. The y-axis is the price increase for each drug.

When the number of pharmaceutical manufacturers is equal to 1 these are brand name drugs. Because of patent(s) the drug is sold exclusively by one pharmaceutical company. These brand name drugs have the highest price increases.

As the number of manufacturers increase the drug price typically decreases. Once a patent expires many pharmaceutical companies can start manufacturing the medication. As a result the price for these drugs go down.

In summary pharmaceutical drug companies have no competition selling brand name drugs. Which is an ideal way to increase the price and corporate profits each year. 

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