Prescription and over-the-counter drugs account for a large share of overall health care spending and they represent major account items in international trade transactions conducted between developed nations. To operate successfully in the pharmaceutical industry, companies have to make substantial investments in research and development – and their discoveries need to be protected via patents and licensing.
What’s more, companies have to perform pre-market trials and satisfy government efficacy and safety requirement before a pharmaceutical product may be launched. Despite all the precautions, situations can arise that result in negative consequences. Companies may face threats posed by the introduction of generic drug alternatives and they may even have to respond to negative consumer reactions that have occurred due to unanticipated side effects. In circumstances like these, it may be necessary to assess losses that have occurred.