Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-18T01:53:38.688Z Has data issue: false hasContentIssue false

3 - Patents and Monopoly Pricing of Pharmaceuticals

from Part I - Monopoly

Published online by Cambridge University Press:  24 November 2022

Roger D. Blair ,
Christine Piette Durrance  and
Tirza J. Angerhofer
Roger D. Blair
Affiliation:
University of Florida
Christine Piette Durrance
Affiliation:
University of Wisconsin
Tirza J. Angerhofer
Affiliation:
Duke University, North Carolina
Get access

Summary

In recent years, there have been many accounts of extreme prescription drug prices that have raised issues of equity, price gouging, social conscience, and demands for relief. In part, these prices arise due to the inelastic demand for lifesaving drugs and the patents that create short-term legal monopolies. The economic rationale for patent protection flows from the fact that the investment made by inventors necessarily precedes any financial benefits received from the discovery of new products or more efficient production processes. Patent law prevents copiers from free riding so that innovators can reap the reward of monopoly profits for their innovation. Thus, there is a trade-off between innovation and affordability. Antitrust law cannot be used to disrupt legal monopolies, so the US government has turned to congressional proposals that would mitigate extreme drug pricing. We also review the policies of other countries that are aimed at reducing pharmaceutical drug prices and consider whether such policies would work in the US market.

Keywords

prescription drug pricingR&D investmentpatent lawlicensingcompulsory licensingprice regulationarbitrageorphan drugs
Type
Chapter
Information
Antitrust Policy in Health Care Markets , pp. 37 - 73
Publisher: Cambridge University Press
Print publication year: 2022

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

ABA Antitrust Section. (2020). Rising Drug Prices: Is Antitrust the Cure? Committee Program Audio. June 22. www.americanbar.org/groups/antitrust_law/committees/committee_program_audio/june2020/062220-rising/.Google Scholar
Arrow, Kenneth J. (1962). Economic Welfare and the Allocation of Resources for Invention. In National Bureau of Economic Research, ed., The Rate and Direction of Inventive Activity: Economic and Social Factors. Princeton, NJ: Princeton University Press, 609–626.CrossRefGoogle Scholar
Austin, David, and Hayford, Tamara. (2021). Research and Development in the Pharmaceutical Industry. Congressional Budget Office. www.cbo.gov/system/files/2021-04/57025-Rx-RnD.pdf.Google Scholar
Blair, Roger D., and Herndon, Jill Boylston. (1996). Restraints of Trade by Durable Good Producers. Review of Industrial Organization 11: 339–353.Google Scholar
Bodoni, Stephanie. (2021). Pfizer, Flynn Pharma Face UK Antitrust Charges Over Price Jump. Bloomberg Law. www.bloomberg.com/news/articles/2021-08-05/pfizer-flynn-accused-of-abusing-position-in-drug-pricing-probe.Google Scholar
Booker, Cory. (2019). Booker Unveils Groundbreaking Bill Establishing National Drug Pricing Agency to Lower Costs, Increase Access. Cory Booker Press Release. www.booker.senate.gov/news/press/booker-unveils-groundbreaking-bill-establishing-national-drug-pricing-agency-to-lower-costs-increase-access.Google Scholar
Capretta, James C. (2019). A Closer Look at International Reference Pricing for Prescription Drugs. Real Clear Policy. www.realclearpolicy.com/articles/2019/03/29/a_closer_look_at_international_reference_pricing_for_prescription_drugs_111142.html.Google Scholar
Centers for Medicare & Medicaid Services. (2020a). NHE Fact Sheet. www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet.Google Scholar
Centers for Medicare & Medicaid Services. (2020b). NHE Tables, Table 2: National Health Expenditures; Aggregate, Annual Percent Change, Percent Distribution and per Capita Amounts, by Type of Expenditure. www.cms.gov/files/zip/nhe-tables.zip.Google Scholar
Church, Richard P., and Richardson, Leah D.. (2021). CMS Proposes to Rescind Most Favored Nation Drug Pricing Rule. National Law Review XI. No. 222. www.natlawreview.com/article/cms-proposes-to-rescind-most-favored-nation-drug-pricing-rule.Google Scholar
Cohen, Joshua. (2021). Court Injunction Temporarily Upends Most Favored Nation Policy to Lower Prices of Medicare Part B Drugs. Forbes. www.forbes.com/sites/joshuacohen/2021/01/02/court-injunction-temporarily-upends-most-favored-nation-policy-to-lower-prices-of-medicare-part-b-drugs/amp/.Google Scholar
Commonwealth Fund. (2021). Key Provisions of Drug Pricing Proposals. Commonwealth Fund. www.commonwealthfund.org/publications/2021/apr/key-provisions-drug-pricing-proposals.Google Scholar
Cubanski, Juliette, Neuman, Tricia, and Freed, Meredith. (2019). The Facts on Medicare Spending and Financing. Kaiser Family Foundation. www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/.Google Scholar
Cubanski, Juliette, Neuman, Tricia, True, Sarah, and Freed, Meredith. (2019). What’s the Latest on Medicare Drug Price Negotiations? Kaiser Family Foundation. www.kff.org/medicare/issue-brief/whats-the-latest-on-medicare-drug-price-negotiations/.Google Scholar
Freed, Meredith, Cubanski, Juliette, and Neuman, Tricia. (2019). A Look at Recent Proposals to Control Drug Spending by Medicare and Its Beneficiaries. Kaiser Family Foundation. www.kff.org/medicare/issue-brief/a-look-at-recent-proposals-to-control-drug-spending-by-medicare-and-its-beneficiaries/.Google Scholar
Galewitz, Phil. (2021). Biden Administration Signals It’s in No Rush to Allow Canadian Drug Imports. KHN. https://khn.org/news/article/biden-administration-signals-its-in-no-rush-to-allow-canadian-drug-imports/.Google Scholar
Golec, Joseph H., and Vernon, John A.. (2006). European Pharmaceutical Price Regulation, Firm Profitability and R&D Spending. NBER Working Paper 12676. www.nber.org/papers/w12676.pdf.Google Scholar
Greiner, Wolfgang, Witte, Julian, and Gensorowsky, Daniel. (2019). Beiträge zur Gesundheitsökonomie und Versorgungsforschung (Band 29). AMNOG Report 2019. www.dak.de/dak/download/amnog-report-2019-pdf-2099700.pdf.Google Scholar
Harris, Gardiner. (2003). Canada Fills US Prescriptions under the Counter. New York Times. www.nytimes.com/2003/06/04/business/canada-fills-us-prescriptions-under-the-counter.html.Google Scholar
Hayes, Michael J., and Prasad, Vinay. (2018). Financial Conflicts of Interest at FDA Drug Advisory Committee Meetings. The Hastings Center Report 48: 10–13.CrossRefGoogle ScholarPubMed
Kaiser Family Foundation. (2019). An Overview of Medicare. Kaiser Family Foundation. www.kff.org/medicare/issue-brief/an-overview-of-medicare/.Google Scholar
Knox, Richard. (2013). $1,000 Pill for Hepatitis C Spurs Debate over Drug Prices, NPR. www.npr.org/transcripts/256885858.Google Scholar
Kobayashi, Bruce. (2008). Spilled Ink or Economic Progress? The Supreme Court’s Decision in Illinois Tool Works v. Independent Ink. Antitrust Bulletin 53: 5–33.CrossRefGoogle Scholar
Lee, Joy Li-Yueh, Fischer, Michael A., Shrank, William H., et al. (2012 ). A Systematic Review of Reference Pricing: Implications for US Prescription Drug Spending. American Journal of Managed Care 18: 429–437.Google ScholarPubMed
Leonard, Mike. (2020). J&J Unit Assails Antitrust Analysis in Cardiac Catheter Case. Bloomberg Law. https://news.bloomberglaw.com/tech-and-telecom-law/j-j-unit-assails-antitrust-analysis-in-cardiac-catheter-case.Google Scholar
Leonard, Mike. (2021). Takeda Loses Antitrust Appeal over Diabetes Drug Patent Listing. Bloomberg Law. https://news.bloombergtax.com/ip-law/takeda-loses-antitrust-appeal-over-diabetes-drug-patent-listing.Google Scholar
Lerner, Abba. (1934) The Concept of Monopoly and the Measurement of Monopoly Power. Review of Economic Studies 1: 157–175.CrossRefGoogle Scholar
Maini, Luca, and Pammolli, Fabio. (2017). Reference Pricing as a Deterrent to Entry: Evidence from the European Pharmaceutical Market. Working paper. https://scholar.harvard.edu/files/lucamaini/files/reference_pricing_as_a_deterrent_to_entry.pdf.Google Scholar
Martell, Allison. (2019). Exclusive: Canada Warns US against Drug Import Plans, Citing Shortage Concerns. Reuters. www.reuters.com/article/us-canada-pharmaceuticals-exports-exclus/exclusive-canada-warns-us-against-drug-import-plans-citing-shortage-concerns-idUSKCN1UD2LN.Google Scholar
Morgan, Steven. (2016). Pharmaceutical Pricing Policies in 10 Countries, Working Papers for the 2016 Meeting of the Vancouver Group. www.commonwealthfund.org/sites/default/files/2018-09/Steven%20Morgan%2C%20PhD_Ten%20Country%20Pharma%20Policy%20Summaries_2016%20Vancouver%20Group%20Meeting.pdf.Google Scholar
Pear, Robert. (2018). Drug Company “Shenanigans” to Block Generics Come under Federal Scrutiny. New York Times. www.nytimes.com/2018/04/14/us/politics/drug-companies-gener.html.Google Scholar
Philippidis, Alex. (2019). Top 15 Best-Selling Drugs of 2018. Genengnews. www.genengnews.com/a-lists/top-15-best-selling-drugs-of-2018/.Google Scholar
PhRMA. (2020). The United States vs. Other Countries: Availability of Cancer Medicines Varies. www.phrma.org/resource-center/Topics/Medicare/The-United-States-vs-Other-Countries-Availability-of-Cancer-Medicines-Varies.Google Scholar
Pollack, Andrew. (2016). Gilead Faces Fights over Hepatitis C and H.I.V. Drugs. New York Times. www.nytimes.com/2016/01/28/business/gilead-faces-fights-over-hepatitis-c-and-hiv-drugshtml.Google Scholar
Pomeranz, Karen. (2019). EvaluatePharma Orphan Drug Report 2019. Evaluate. https://info.evaluate.com/rs/607-YGS-364/images/EvaluatePharma%20Orphan%20Drug%20Report%202019.pdf.Google Scholar
Reuters. (2020). Who Can Make Gilead’s Coronavirus Drug, Licence Free? Reuters. www.reuters.com/article/us-health-coronavirus-gilead-sciences-ex/who-can-make-gileads-coronavirus-drug-licence-free-idUSKBN22I1GP.Google Scholar
Rood, Lee. (2021). Fact Check: Biden Administration Delays Implementation of Trump Rule on Insulin, EpiPens. USA Today. www.usatoday.com/story/news/factcheck/2021/01/30/fact-check-biden-freezes-rule-health-center-insulin-epipen-prices/4254921001/.Google Scholar
Rosenthal, Elizabeth. (2013). In Need of a New Hip, but Priced out of the US Market. New York Times. www.nytimes.com/2013/08/04/health/for-medical-tourists-simple-math.html.Google Scholar
Schenker, Lisa. (2017). FDA Approves Northbrook Company’s $89,000 Muscular Dystrophy Drug. Chicago Tribune. www.chicagotribune.com/business/ct-muscular-dystrophy-drug-fda-approval-0210-biz-20170209-story.html.Google Scholar
Spatz, Ian D. (2020). FDA Calls States’ Bluffs on Drug Importation. Statnews. www.statnews.com/2020/02/18/fda-calls-states-bluffs-on-drug-importation/.Google Scholar
Tanne, Janice Hopkins. (2007). US Makers of Joint Replacements Are Fined for Paying Surgeons to Use Their Devices. British Medical Journal 335: 1065.Google Scholar
Towse, Adrian, Pistollato, Michele, Mestre-Ferrandiz, Jorge, et al. (2015). European Union Pharmaceutical Markets: A Case for Differential Pricing? International Journal of the Economics of Business 22: 263–275.CrossRefGoogle Scholar
US Food and Drug Administration. (2019). The United States vs. Other Countries: Availability of Cancer Medicines Varies. PhRMA. www.phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Org/PDF/G-I/IPI-Model---Comparison-of-Cancer-Medicine-Availability---012819.pdf.Google Scholar
US Food and Drug Administration. (n.d.). Search Orphan Drug Designations and Approvals. www.accessdata.fda.gov/scripts/opdlisting/oopd/index.cfm.Google Scholar
Viscusi, W. Kip, Harrington, Joseph E., and Sappington, David E. M.. (2018). Economics of Regulation and Antitrust. 5th ed. Boston: MIT Press.Google Scholar
Ways and Means Committee Staff. (2019). A Painful Pill to Swallow: US vs. International Prescription Drug Prices. https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/U.S.%20vs.%20International%20Prescription%20Drug%20Prices_0.pdf.Google Scholar
White House. (2021). Budget of the United States Government: Fiscal Year 2022. www.whitehouse.gov/wp-content/uploads/2021/05/budget_fy22.pdf.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×