High drug costs are often in the news. Consumer groups contend that the pricing for some drugs is "too high" considering that the costs to manufacture each dose is so low. They talk of price gouging and excessive profits. Pharmaceutical companies defend the price charged on the basis of nonmanufacturing costs such as research and development and others.

The following is a generic value chain for a pharmaceutical firm:

R and D.   Design.   Production.   Marketing.   Distribution.

1. Which aspect(s) of the value chain is being used by the consumer groups in relationship to their expectation of pricing? What about the pharmaceutical companies?

2. Which cost(s) do you think should be included when comparing the cost of a drug with its price? Why?