Price Gouging Research Articles

Interconnected influence: Unraveling purdue pharmaceutical's role in the global response to the opioid crisis

BackgroundThe global pharmaceutical industry has a long history of prioritizing profits over public health through widespread practices such as price gouging, deceptive marketing, and fraud. A prominent example of this issue is the mislabeling and mass-marketing of OxyContin by Purdue Pharmaceuticals (Purdue) that catalyzed the opioid crises in and beyond the United States. MethodsGuided by Actor-Network Theory, this case study employs Visual Network Analysis to map the actors-networks involved in responding to the harms caused by Purdue. Data was generated from peer-reviewed and grey literature published between 2007 and 2022 (n = 40) and imported into Gephi visualization software where centrality metrics were applied. ResultsA total of 39 actors and 99 relationships were visualized based on the relational thinking that actors who are heavily interconnected with others are rendered important. Centrality measures identified the socio-technical centrality of Purdue in influencing the response to the harms it caused. Purdue exerted influence through various avenues, most prominently through the creation and cooptation of pain advocacy groups, their close ties with United States elected officials, and through embedding pro-opioid messaging in international guidance documents. In doing so, Purdue was able to extend the reach and impact of their opioid promotion, while simultaneously limiting the capacity of regulatory bodies to pursue accountability and implement policies to mitigate opioid-related harms. ConclusionThis study advances understandings of the complex interplay between transnational pharmaceutical companies, global health systems, regulatory bodies, and public health. In doing so, we underscore the need for stronger regulation and increased transparency surrounding the interactions between pharma, patient groups, governments, and international organizations to better address and prevent future harms.

Maladaptive behaviors in disasters: case study evaluation of Hurricane Hugo, Hurricane Katrina and the Haiti Earthquake.

Maladaptive behaviors during a disaster refer to actions that do not benefit the individual or society. Quarantelli highlights several maladaptive behaviors myths associated with disasters: widespread antisocial behavior, passivity, role conflict or abandonment, and sudden widespread mental health breakdowns (1). Despite early work reporting these myths, the common perception is that maladaptive behaviors such as rioting, looting, panic, and criminal conduct are prevalent in the wake of disasters. This is despite research by de Ville de Goyet and Arnold which has called on public officials and the media to stop propagating false disaster myths (2, 3). The classic academic response has been that this is a misconception and that, in fact, such behaviors are a very small part of the overall disaster and are mostly non-existent. Misconceptions about the prevalence of maladaptive behaviors can lead to inappropriate resource allocation, such as allocating extra police officers to prevent looting when the overall crime rate for the most part, decreases during disasters (4). Furthermore, while there are several persistent maladaptive behaviors myths, this is confounded by the presence of actual negative behaviors post disaster: false damage claims, insurance fraud, illegally obtaining relief supplies, failure to provide contracted repair services, hoarding of essential items, psychological trauma (which can lead to intergenerational transmission of the disaster memory) and medications and price gouging (5).When reading lay-press articles about recent disasters, it appears that these behaviors are on the rise. This raises the question: Has there been a change in the basic human reaction to disasters and are maladaptive behaviors on the rise? This review article focuses on case studies from three natural disasters: Hurricanes Hugo and Katrina, and the Haiti Earthquake. The goal of this review article is to evaluate these three natural disasters for evidence of maladaptive behaviors.

When Goliath sells to David: explaining price gouging perceptions through power

When Goliath sells to David: explaining price gouging perceptions through power

Seeking efficiency or price gouging? Evidence from pharmaceutical mergers

We examine the impact of mergers on drug prices and document significant differences between the post-merger pricing strategies of highly innovative pharmaceutical firms and other firms. While the former raise prices of overlapping drugs, especially brand name drugs that tend to be first-in-class and patented, we find pervasive evidence of price reductions by generic manufacturers. Our evidence suggests that the price reductions are due to cost cuts realized by less innovative firms in overlapping product spaces. We also show that less innovative acquirers cut R&D and shift product development from high-novelty products to cheaper, less-risky products.

Social Media Marketing and Price Gouging: A Comparative Study of Consumer Attitudes in Jordan, Saudi Arabia, And Egypt

Social Media Marketing and Price Gouging: A Comparative Study of Consumer Attitudes in Jordan, Saudi Arabia, And Egypt

Evaluations of Compliance With California's First Tobacco Sales Bans and Tobacco Marketing in Restricted and Cross-Border Stores.

Beverly Hills and Manhattan Beach were the first California cities to end tobacco sales. Previous research assessed retailers' perceptions of the laws. This study is the first to evaluate compliance (Study 1), assess whether branded or unbranded tobacco cues remain, and examine cigarette prices/discounts in cross-border stores (Study 2). Each of the four data collectors requested Marlboro or e-cigarettes (randomly assigned) in all restricted stores (n = 33) until four attempts were exhausted or a violation occurred. Follow-up visits recorded whether former tobacco retailers advertised tobacco or contained unbranded cues. In a random sample of 126 cross-border stores (half within 1 mile of no-sales cities and half 2-4 miles away), data collectors recorded price of Marlboro and presence of cigarette discounts. Mixed models (stores within tracts), tested for differences between near and far stores, adjusting for store type and median household income. Compliance was 87.5%: three stores sold Marlboro (US $8, $10, and $10) and one sold Puff Bar (US $16). Tobacco-branded items and unbranded tobacco cues remained in one store each. Mean Marlboro price was US $10.61 (SD = 1.92) at stores within 1 mile of no-sales cities, averaging US $0.73 more than at stores farther away (p < .05). However, odds of advertising cigarette discounts did not differ between stores nearby and farther from no-sales cities. Nearly all retailers complied with tobacco sales bans within 6-12 months of implementation. In addition, retail tobacco marketing was nearly eliminated in the two cities. There was no evidence of price gouging for Marlboro cigarettes in cross-border stores. Evidence from two early adopters of tobacco sales bans suggests that such local laws can be implemented effectively in California, although results from these high-income cities in a state with a strong tobacco control record limits generalizability. Enforcement involving routine purchase attempts rather than visual inspection of tobacco products is recommended. Although Beverly Hills and Manhattan Beach are each surrounded by communities where tobacco sales persist, there was no evidence of price gouging for cigarettes or greater presence of discounts in cross-border stores. Evaluations of the economic impacts and public health benefits of tobacco sales bans are much needed.

Safeguarding South African Consumers’ Socio-Economic Rights During COVID-19: Competition Commission v Babelegi Workwear and Industrial Supplies

AbstractThis article explores the responses of the South African competition authorities to the impact of the COVID-19 pandemic on the socio-economic rights of consumers in relation to the price gouging of essential and medical supplies. After discussing the constitutional and legislative context of socio-economic rights and excessive pricing, it examines the first case in which the competition authorities were called upon to decide on the excessive pricing of medical supplies during COVID-19. The article finds that, while the competition authorities were swift to interpret the Competition Act widely and act against suppliers charging excessive prices, there remains a gap in South Africa's legislative framework as there is no specific legislation regulating price gouging during states of pandemic or disaster. The article identifies the need for legislative development and concludes by offering recommendations for addressing future incidents of price gouging.

Price Gouging or Market Forces? Fairness Perceptions of Price Hikes in the Pandemic

Price Gouging or Market Forces? Fairness Perceptions of Price Hikes in the Pandemic

Effect of Geopolitical Situation on Potassium Iodide Sale

This whitepaper explores the intricate relationship between geopolitical dynamics and the demand for potassium iodide (KI), a critical component of public health and emergency preparedness measures. KI serves as a safeguard against the adverse effects of radioactive iodine (RAI) exposure in the event of nuclear incidents. Geopolitical factors significantly influence the availability, accessibility, and trade regulations of KI, as demonstrated through case studies like the Russia-Ukraine conflict and historical nuclear accidents. International agreements, regulatory frameworks, and trade policies are key in shaping the KI market, with growing demand stemming from the nutraceutical and laboratory reagent sectors. While solid KI is the predominant market segment, there remains a challenge in the presence of iodine alternatives. Amidst the Russia-Ukraine war, KI demand has surged, depleting supplies and resulting in price gouging. Understanding these trends and the broader geopolitical impact on KI is essential to appreciate its critical role in safeguarding public health.

Unconscionability and Poverty

Matthew Desmond made the claim in Evicted, his powerful work on housing insecurity, that those concerned with alleviating poverty should focus not merely on ensuring that poor people have higher disposable incomes, but on countering the exploitative price gouging that depresses the value of whatever income they have. This suggests the possibility that it might be a worthwhile anti-poverty strategy for courts to use the unconscionability doctrine to regulate exploitative contracts. Three main issues follow from considering this possibility: (1) Do the poor actually pay more for goods of the same quality? (2) If they indeed pay more, do they do so because prices are exploitative? How should we define an exploitative price, and how can we identify that any particular group of buyers is indeed exploited? (3) Could courts seeking to make use of the unconscionability doctrine realistically identify cases in which poor people generally are overcharged, or will courts successfully invoke the doctrine to challenge unwarranted prices only when the price a particular seller charges exceeds some benchmark (e.g., the price charged before an emergency or the price charged to other buyers in highly similar transactions)? While there is (reasonably) good evidence that the poor pay more for equal quality goods and it is possible (but very hard to determine) that exploitative pricing is a genuine issue as well, efforts to use the unconscionability doctrine to solve the problem of exploitative contracts are quite unlikely to succeed. Doctrinal and practical constraints make this solution a bad fit. If we worry, for example, that small stores in urban areas with high concentrations of poor residents overcharge, we should probably look to establishing and sustaining less exploitative suppliers, not to using common law courts to police price gouging.

Stockpiling at the Onset of the COVID-19 Pandemic: An Empirical Analysis of National Prescription Drug Sales and Prices

At the onset of the coronavirus (COVID-19) pandemic, hospitals experienced a demand surge for COVID-19–related medical care while simultaneously struggling to source prescription drugs needed to manage COVID-19 patients. This is worrisome as shortfalls in the supply of essential drugs can negatively impact patient outcomes. The popular press reporting on these challenges suggests that they are caused by supply chain disruptions. However, rigorous research on the relationship between the pandemic and prescription drug supply is limited. To address this gap, we leverage a quasi-experimental design and IQVIA’s National Sales Perspectives™ data from 2018 to 2020. We focus on prescription drugs indicated for the management of COVID-19 patients and a set of control drugs (i.e., drugs not used for COVID-19). We find that in the early phases of the pandemic, hospitals stockpiled prescription drugs indicated for the management of COVID-19, making this behavior an under-recognized cause of the sourcing challenges. The sales volume of drugs indicated for COVID-19 management was concentrated in the first two months of the pandemic, after which sales decreased significantly despite a nationwide increase in COVID-19–related hospitalizations. We investigate another potential cause of stockpiling: expected price increases. Counter to concerns of price gouging, we find little evidence of price inflation for these drugs. An implication for drug manufacturers is that orders due to stockpiling by downstream buyers early on in a pandemic may need to be discounted when predicting future demand. Our results have implications for drug suppliers, hospitals, and policymakers interested in improving medical product supply chain resilience. This paper was accepted by Stefan Scholtes, healthcare management. Funding: R. M. Conti was supported by the National Science Foundation (Grant 1123649-463157) and the Sloan Foundation. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2021.04150 .

Why higher copayments for opioids did not reduce use among Medicare beneficiaries.

To examine whether higher cost-sharing deterred prescription opioid use. Medicare Part D claims from 2007 to 2016 for a 20% random sample of Medicare enrollees. We obtain estimates of the effect of cost-sharing on prescription opioid use using ordinary least squares and instrumental variables methods. In both, we exploit the variation (change) in cost-sharing within plans over time for a sample of beneficiaries who remain in the same plan. Focusing on changes in cost-sharing within a plan for a constant sample of beneficiaries mitigates potential bias from plan selection and using a constant set of weights derived from use in year (t) eliminates changes in the cost-sharing indexes due to (endogenous) consumer choice in year (t+1). Part D plans adopted benefit changes designed to reduce opioid use, including moving opioids to higher cost-sharing tiers. Increasing plan copayments for hydrocodone or oxycodone was associated with reductions in plan-paid claims and offsetting increases in cash claims. Widespread availability of low-cost generics combined with the anti-clawback provision in Part D mediated the effect of higher cost sharing to curb opioid use. As plans moved generic opioids to higher cost-sharing tiers, beneficiaries simply paid cash prices and aggregate use remained largely unchanged. The anti-clawback provision in Part D, intended to protect beneficiaries from price gouging, limited plans' ability to constrain opioid use through typical demand-side measures such as increased cost-sharing.

Sick with “shareholder value”: US pharma’s financialized business model during the pandemic

US-based pharmaceutical companies claim that they need high drug prices to provide sufficient profits to fund investments in innovation. This argument is consistent with the corporate-finance principle of retaining profits and reinvesting in productive capabilities that is central to our “theory of innovative enterprise” (TIE). The problem is that, for decades, resource allocation at the largest US-based pharmaceutical companies, known as “Big Pharma,” has embraced the agency-theory argument that a company should be run to “maximize shareholder value” (MSV). We use TIE to expose MSV as an ideology of “predatory value extraction” (PVE), which legitimizes price gouging, downsizing the labor force, and tax dodging. In the body of the article, we document that the largest US-based pharmaceutical companies have become highly financialized, using all their profits, and often more, to distribute cash dividends and stock buybacks to shareholders. We then show the extent to which stock-based remuneration incentivizes senior pharmaceutical executives to engage in this financialized behavior. As cases in point, we consider the financialization of the two US-based companies, Pfizer and Moderna, that were centrally involved in the delivery of COVID-19 mRNA vaccines during the SARS-CoV-2 pandemic. We conclude our analysis by placing PVE in the US pharmaceutical industry in the broader context of the US healthcare system and the US economy.

Solidarity Among Strangers During Natural Disasters: How Economic Insights May Improve Our Understanding of Virtues

The renaissance of Aristotelian virtue ethics has produced an extensive philosophical literature that criticizes markets for a lack of virtues. Drawing on Michael Sandel’s virtue-ethical critique of price gouging during natural disasters, we (1) identify and clarify serious misunderstandings in recurring price-gouging debates between virtue-ethical critics and economists. Subsequently, (2) we respond to Sandel’s call for interdisciplinary dialogue. However, instead of solely calling on economics to embrace insights from virtue ethics, we prefer a two-sided version of interdisciplinary dialogue and argue that virtue ethics should embrace economic insights. In particular, we argue that if virtue ethics is to preserve its social relevance under modern conditions, it should re-conceptualize its notion of virtue and re-evaluate the self-interested but effective—and in this sense solidary—help among strangers via markets as virtuous rather than devaluate it as greed, that is, as vicious price gouging.

Do earthquake survivors want to escape the threats of earthquakes and why?

Destructive earthquakes and the possibility of experiencing destructive earthquakes may cause people to move from their area to safer ones. However, despite high earthquake risk, people may not want to leave the area they reside for various reasons. The objective of this study was to investigate whether earthquake experience, earthquake insurance, satisfaction with city, self-efficacy, risk perception, social support, post-earthquake insecurity and price gouging was correlated with relocation willingness in an earthquake-prone area. Data were collected using a survey from 1114 people residing in Kocaeli (Türkiye), where a devastating earthquake occurred in 1999. 610 people who participated in the study were affected by this earthquake and 504 people were not affected. In order to better understand the impact of earthquake exposure on relocation willingness, ordinal logistic regression analyzes were performed separately for the earthquake affected and unaffected sample. The result showed that the relocation willingness of the unaffected participants was higher than the relocation willingness of the affected participants. People who were psychologically affected by the earthquake were more likely to relocate. Satisfaction with the city reduced the participants' relocation willingness mostly. The fear of earthquakes and perceived insecurity after a future earthquake increased all participants' relocation willingness. It is hoped that this study will guide scientists and disaster managers working in regions where destructive disasters may occur to improve strategies related to relocation policy and earthquake risk reduction.

THE ECONOMIC PAMPHLETEER: Agri-food corporations are not real people; why does it matter?

First paragraph: Corporations are not real people. This may seem obvious, but for more than a hundred years the U.S. Supreme Court has recognized corporations as legal persons with many of the same constitutional rights as real people (Torres-Spelliscy, 2014). Why does it matter? Because corporations can do things that real people can’t and yet are immune to legal liabilities that real people must consider. The lack of economic com­petitiveness in agri-food markets is one conse­quence of treating corporations as real people. So is the lack of government protection of farm and food workers from exploitation and the natural environment from extraction and pollution. Recent examples include concerns about corporate price gouging following the COVID-19 pandemic (Reich, 2022) and the weakening of the Environ­mental Protection Agency’s authority to restrict corporate pollution (Feldscher, 2022). . . .

Food price and availability in Solomon Islands during COVID-19: A food environment survey.

Background: In Solomon Islands, the retail food environment is an important food source, for instance, the dominant source of fresh fruit and vegetables for urban consumers is open markets. The effects of COVID-19 mitigation measures (such as restriction of human movement and border closures) in early 2020 placed food security at risk in many parts of the community. Of particular concern was the risk of price gouging in an already price-sensitive market. Aims: The study aimed to provide rapid and policy-relevant information on the pricing of foods in the urban food environment in Solomon Islands in the context of the unfolding COVID-19 pandemic. Methods: A vendor survey was conducted in July to August 2020 and repeated in July 2021 using a survey tool that collected information on type, quantity, and price of food on offer. Findings: We found price reductions among the majority of fresh fruit and non-starchy vegetables available. A trend of rising prices was reported for some other commodities, such as fresh locally caught fish. Conclusion: Our findings highlight the impact of 'schocks to the system' on food prices as a potential barrier or enabler to consumption of fresh foods purchased from urban areas - an important finding in a price sensitive market. The survey design was successful in collecting pricing data from the retail food environment during a time of external 'shock to the system'. Our approach is applicable to other settings needing a rapid survey of the external food environment.

On the Ethicality of Islamic Banks’ Business Model

AbstractThis paper scrutinizes the ethicality of Islamic banks’ (IBs’) business model by employing the ‘objectives of Islamic law’ (Maqāsid al‐Sharī’ah). This necessitates developing an ethical framework to construe two primary injunctions of Islamic finance, namely ribā and gharar. The former embodies financial decoupling (aggravating risk‐shifting) and unjust price gouging (provoking economic stagnation and financial exclusion), while the latter involves asymmetric information and excessive risk‐taking behaviour (exacerbating financial fragility and thus systemic risk). We empirically and theoretically illustrate that these unethical issues are still prevalent in the IBs’ modes of financing, despite the Sharī’ah‐compliant endorsement of religious scholars (i.e. Sharī’ah supervisory boards). This affirms that ethicality is merely an impression management exercise of IBs instead of their true business identity. The way forward is to conceptualize IBs’ modes of financing beyond just Sharī’ah compliance by scrutinizing their ethical impact on society at large. This would require updating centuries‐old Islamic rulings (Fatāwā) on financial transactions and consulting finance academics and practitioners.

Food retailer response to price gouging litigation

AbstractPrice gouging laws are designed to protect consumers from skyrocketing prices, but are they beneficial in practice? In this research, we analyze food retailers' response to widespread price gouging litigation for table eggs at the onset of the COVID‐19 pandemic. Our results suggest that price gouging litigation led to a dramatic change in US food retailer behavior, which persisted long after the resolution of many of these legal disputes. Major grocery retail chains responded to price gouging litigation by announcing price freezes on thousands of staple products. By rigidly adhering to pre‐pandemic price levels for eggs, we find that retailer response led to a breakdown in the historic dynamic equilibrium relationship between egg prices and the costs of major inputs. At a time when the cost of egg production increased sharply, we find that retailers chose to reduce their purchases and price promotions for eggs rather than raise prices. This suggests that—in response to price gouging litigation—food retailers are willing to accept empty shelves in lieu of increasing prices.

The Morality Map: Does living in a smaller community cause greater concern for moral reputation?

Small rural communities differ in social visibility compared to large urban cities due to their interconnected social networks. We hypothesized the higher social visibility of rural communities would cause members to see their reputations as more vulnerable and make them more concerned about protecting their reputations than people in cities. An online experiment (N=198) found imagining being in a small rural community with high social visibility caused people to report more concern for reputation and resist risking their reputation by price gouging, compared to those who imagined living in a large anonymous urban community. A cross-sectional analysis of the World Values Survey (N=119,745) revealed a small but significant correlation between living in smaller communities and having more concern for one's reputation. This work has implications for understanding how cultural and moral differences across regions might arise from geographic features of those regions.