Napsterizing Pharmaceuticals: Access, Innovation, and Welfare

38 Pages Posted: 19 Jan 2012 Last revised: 26 Jan 2012

See all articles by Michael J. Moore

Michael J. Moore

Frank Batten School of Leadership and Public Policy

Edward A. Snyder

University of Chicago - Booth School of Business

James W. Hughes

Bates College - Department of Economics

Date Written: January 19, 2011

Abstract

We analyze the effects of a hypothetical change from the status quo with patent protection on pharmaceuticals to a world in which all patent rights on both existing and future branded drugs would be eliminated. Our analysis takes into account stylized facts concerning the nature of competition between branded and generic competition, the value of the flow of potential new drugs, the effective patent life under the existing Hatch-Waxman framework and, most critically, the essential features of prescription benefit coverage whereby consumers face relatively low marginal prices (copayments) for their prescriptions. Our calibration of a simple model indicates that the costs of Napsterizing pharmaceuticals exceed the benefits by a ratio of about 3 to 1.

Keywords: intellectual property, benefit-cost analysis, pharmaceutical policy

Suggested Citation

Moore, Michael J. and Snyder, Edward (Ted) A. and Hughes, James Wesley, Napsterizing Pharmaceuticals: Access, Innovation, and Welfare (January 19, 2011). Available at SSRN: https://ssrn.com/abstract=1987184 or http://dx.doi.org/10.2139/ssrn.1987184

Michael J. Moore (Contact Author)

Frank Batten School of Leadership and Public Policy ( email )

1400 University Ave
Charlottesville, VA 22903
United States
312-925-3315 (Phone)

Edward (Ted) A. Snyder

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

James Wesley Hughes

Bates College - Department of Economics ( email )

Lewiston, ME 04240
United States

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