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Issues Surronding Patents for Pharmaceuticals

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Submitted By sarahsmile
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Date: August 19, 2011 There are many issues surrounding patents for pharmaceuticals. Some of the more important issues include: * The use of pharmaceuticals makes a major contribution towards the level of care experienced at a doctor and hospital visit. * An increasing number of people are taking drugs to control chronic conditions, so more people have a stake in assuring a productive pharmaceutical industry. * There are some very aggressive marketing practices by major pharmaceutical companies. * There are extremely high out-of-pocket prescription drug expenses for some people. * The rate at which pharmaceutical expenditures have increased over the last ten years brings the industry to the forefront of policy debates over healthcare cost containment. * The instances of government approval of drugs that were shown to have dangerous side effects and the reluctance to remove dangerous drugs from the market. * Frequent prescribing of expensive drugs when evidence suggests that older, less expensive products would be as equally effective.
When firms develop new products, they can apply for a patent. Upon receiving a patent, it prevents other firms from selling that product for twenty years. During the seventeen years, the developing firm can is protected from the competition and can charge higher prices and make large economic profits. Patents foster new inventions by rewarding inventors for the expense and risk of bringing new products to the market.

There is only one firm producing the product so it is a monopoly, the firm's demand curve is identical to the market demand curve. The monopoly firm does not have to worry about competitor's prices so the monopolist will continue to sell units as long as the extra amount he receives by selling an extra unit is greater than his marginal cost. The firm will always set their quantity at the level where marginal revenue equals marginal cost.
Patents are tools that the government uses to promote innovation. They believe that companies will be more willing to create new products if they know that they will have monopoly power over those products.
The new cancer drug "CureBCNow" is estimated to cost $403 million dollars out-of-pocket to develop. This doesn't include the opportunity costs lost due to investing now and forgoing the investments they could have made instead.
Drugs are developed in different phases: * Pre-clinical development: The initial stage in which preliminary studies of chemicals that have been isolated are then screened. This process can take years because you have to identify promising leads, validate them, tweak their chemical structures and then conduct endless in vitro studies. Only a small fraction of drugs that show promise make it to the next stage. * Clinical trials: These trials are grouped into three stages, each one representing a milestone in a drug's development. 1. Phase I. Small studies in healthy volunteers designed to the basic pharmacology in humans. 2. Phase II. The drug is tested in groups with a condition of interest. The trials are larger and may be random, designed to evaluate different dosing regimens. 3. Phase III. These are the largest studies, they are random and designed to establish a effectiveness against a given condition.
Regulators like the FDA, require at one or more Phase III. trials to support an approval to market a drug. In cases where real outcomes like mortality need to be measured, Phase III. studies can be massive.
The reason companies are willing to undertake the expense if there is a possibility of receiving a patent is because they know they will have exclusive rights to the production of that drug for the next 20 years. That is a barrier to entry that excludes all other competitors from trying to market this newly developed drug. In 20 years, the developer can decide how to price the drug and make back billions of dollars for their time and money spent in research and development.

I do recommend that Ecovia continue to grant 20 year patents for qualifying medicines because it encourages innovation and pharmaceutical companies need that incentive in order to produce that kind of capital to begin research and development. I realize the millions of dollars in expense and the countless hours in research and development are outrageous but I would like to see a cure for cancer in my lifetime or even in my child's lifetime. I don't think you can really put a price on saving a life so we must keep funding the scientists so they can continue their valuable research. People with various incurable diseases are already living many years more than what others have in the past, thanks to the prescription drugs available today.

Works Cited
Schweitzer, Stuart O. 2006, October. Pharmaceutical Economics and Policy (2nd Edition). Accessed on August 19, 2011 via: http://site.ebrary.com/lib/itttechlibrary/docDetail.action?docID=10460685&p00=critical%20issues%20surrounding%20patents%20pharmaceuticals%202011

Moffatt, Mike. "What You Need to Know About Monopolies and Monopoly Power." About.com:Economics. Accessed on: August 19, 2011 via: http://economics.about.com/cs/microeconomics/a/monopoly.htm

Gavura, Scott. 2011 April 14. "What does a New Drug Cost?" Science-Based Medicine: Exploring issues and controversies in the relationship between science and medicine. Accessed August 19, 2011 via: http://www.sciencebasedmedicine.org/index.php/what-does-a-new-drug-cost/

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