Question

Getitall, the CEO of Gooddrug LLC claimed that in the US, drug companies should receive a patent of 100 years for each drug they develop. this allows them a prolonged llegal monopoly on the sale of that drug, provide better incentives to innovate and help consumer pay stable prices.

Jane, the FDA consultant strongly disagree with that statement.

Give reasons related to consumers, patients, and the market to support Jane's claim

Answer 1

Generally, such a patent with a 100 year life-span will not be given. It is against the spirit of fair competition.

The reasons for Jane's claim can be summarized as under:

Consumers

- Prices will not be stable, but will continue to rise drastically due to the patent.

- Consumers will have no choice regarding the brand they purchase.

- Proper information may not be available to the consumers.

Patients

- There will be a shortage of the medicines, as the monopoly will not produce at social optimal. This may lead to black markets.

- Patients will have no guarantee about the quality of medicines.

- Patients with low income levels may remain devoid of the treatment, due to high costs.

The Market

- There will be no competition in the market, as the patent creates a monopoly for 100 years. Prices will be high, and quantity will be low.

- Due to lack of competition, there will be no incentive to innovate and produce better medicines.

- The market will have huge entry barriers, and thus a large deadweight loss. The company will make huge profits at the expense of the other market participants (patients, consumers and other sellers).