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Chapter 9: The Pharmaceutical Industry

Source: levine.sscnet.ucla.edu
Topic: Pharmaceutical Industry

Sort Desciption: pharmaceutical industry. The indivisibility is large, with estimates of ... new products to market is the pharmaceutical industry. ...

Content Inside: Boldrin & Levine: Against Intellectual Monopoly, Chapter 9 Chapter 9: The Pharmaceutical Industry It is often argued that the best case for patents is in the pharmaceutical industry. The indivisibility is large, with estimates of the average cost of bringing a single new drug to market as high as $800 million. Patent protection is more limited than in other industries: because of the lengthy gap between discovery and approval of a new drug, the effective monopoly protection is estimated, since the 1990s, to last only 12 years, apart for extensions. Indeed, according to industry surveys, the only industry in which patents are thought to play an important role in bringing new products to market is the pharmaceutical industry. The pharmaceutical industry is worthy of special consideration also for another, opposite, reason. The technology operated by the pharmaceutical industry – the chemical and industrial processes, through which medicines are produced, packaged, and shipped, seems to fit the constant returns to scale hypothesis almost perfectly. That is, the cost of shipping the ten millionth container of medicine is about the same as that of shipping the first. This is why, after all, everyone complains about the pharmaceutical companies not shipping medicines to poor countries – the actual few additional cents needed to produce the medicine even poor African consumers would be willing to pay make the withdrawal of supply by big pharma as close to economic crime as anything can be. Under these circumstances we would expect that there are many potential producers of a medicine, and that the industry would be relatively competitive. Yet, since the 1970s, pharmaceutical manufacturing has become quite concentrated with a few large companies holding a dominant position throughout the world and with a few companies producing medicines within each country. Why is this? The industry claims it is because only very large firms can afford the high cost of ...

pharmaceutical patent protection in ukraine

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