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Question 1.
1. Generally the production costs of medicines are relatively low compared to the research and development costs that go into the innovation of such medicines. The consumer groups take into consideration only the production costs and hence see them as very higher. However the pharmaceutical companies include the costs that start from all stages of the value chain right from R & D, Design, production, marketing and distribution and this is done to cover all the costs incurred in the value chain.
2. The costs incurred in the value chain must be considered when comparing the cost of the drugs with their prices and this is mainly because when these costs are not covered it will result in huge losses for the firm which will not motivate the firm to innovate new drugs through R & D. Hence the costs incurred in the value chain should be considered when fixing the price....

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