Question

There are many policy proposals aimed at curtailing the high cost of pharmaceuticals and/or encouraging innovation. Briefly analyze the costs and benefits of the following policy proposals: a. The government uses an auction to estimate the private value of patents and then offers to buy out patents at this private value. Most patents purchased would be placed in the public domain. b. The government offers a $5 billion prize to the first drug company that develops a cure for Alzheimer’s disease. c. In order to control the rising costs of new drugs, the government puts a cap on drug prices at $10,000 per month.

Answer 1

Benefits: The advantage of this mechanism could in a specific case be a decrease of deal costs and other costs due to the fact that the celebrations are not needed to agree upon certain compensation and lengthy proceedings require not constantly takes place before allowing the use of the trademarked creation.

The application of a liability rule does not depend on the funds of a prospective user.

The administration perhaps has a better, more objective, view of financial elements and the possibility of making fast and for that reason effective decisions

Costs: It might be challenging for the administration to recognize situations in which liability guideline is more suitable

An unfavorable influence of macroeconomic aspects

b.If the business is capable of steering their research study programs to take advantage of profit chances, then public law interventions like incentives to discover these drug types can work.

A variety of innovative new drugs cost more and have preventive and alleviative effects that lead to higher usage.
In addition, brand-new "way of life" drugs have actually been developed that enhance the lifestyle and can be taken for decades.
Prescription drug expenditures are likely to continue their quick increase, driven by new drug discoveries and greater use of drugs (particularly among an increasingly older population), as well as by the growing demand

If rather business is stumbling around in the dark and producing drugs basically at random then these sorts of temptations are at best useless and at worst wasteful.

c. New drugs are priced according to their restorative worth and the availability of a good replacement.
A new drug can likewise be priced according to principle worth.
When generic versions enter the market after the patent on a branded drug has actually expired, the branded drug loses the marketplace share but its rate boosts.