Issues Surronding Patents for Pharmaceuticals

In: Business and Management

Submitted By sarahsmile
Words 883
Pages 4
Date: August 19, 2011 There are many issues surrounding patents for pharmaceuticals. Some of the more important issues include: * The use of pharmaceuticals makes a major contribution towards the level of care experienced at a doctor and hospital visit. * An increasing number of people are taking drugs to control chronic conditions, so more people have a stake in assuring a productive pharmaceutical industry. * There are some very aggressive marketing practices by major pharmaceutical companies. * There are extremely high out-of-pocket prescription drug expenses for some people. * The rate at which pharmaceutical expenditures have increased over the last ten years brings the industry to the forefront of policy debates over healthcare cost containment. * The instances of government approval of drugs that were shown to have dangerous side effects and the reluctance to remove dangerous drugs from the market. * Frequent prescribing of expensive drugs when evidence suggests that older, less expensive products would be as equally effective.
When firms develop new products, they can apply for a patent. Upon receiving a patent, it prevents other firms from selling that product for twenty years. During the seventeen years, the developing firm can is protected from the competition and can charge higher prices and make large economic profits. Patents foster new inventions by rewarding inventors for the expense and risk of bringing new products to the market.

There is only one firm producing the product so it is a monopoly, the firm's demand curve is identical to the market demand curve. The monopoly firm does not have to worry about competitor's prices so the monopolist will continue to sell units as long as the extra amount he receives by selling an extra unit is greater than his marginal cost. The firm will always set their quantity…...

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