Question 1. Value Chain 25% 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 are 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 Questions: How do consumer groups define cost (5 pts)? How does the pharmaceutical industry define cost (5 pts)? Which costs do you think should be included when comparing the cost of a drug with its price (5 pts)? If you were working for a pharma firm, how would you use the value chain to prepare a defense of your pricing practices (5 pts)? How could you use the information supplied by the value chain to improve the profitability of your firm when prices are set by the market? Provide an example of how to approach this problem for the pharma industry) from a management perspective. (5 pts) 1. 2. 3. 4. 5