Patent Expiration, Entry, and Competition in the U.S. Pharmaceutical Industry

Michael D. Whinston,

MDW

Michael D. Whinston Harvard University and National Bureau of Economic Research

Richard E. Caves, and

REC

Richard E. Caves Harvard University

Mark A. Hurwitz

MAH

Mark A. Hurwitz Columbia Law School

Discussants: Peter Temin and

PT

Peter Temin

Ariel Pakes

AP

Ariel Pakes

THE ETHICAL PHARMACEUTICAL industry is an important one, not so much for its economic size as for the benefits that it delivers to users of its products. The industry has been transformed structurally since the 1940s from a producer of selected chemicals to a research-oriented sector that makes a major contribution to the technology of health care. Its very success in generating a stream of new drugs with important therapeutic benefits has involved the industry in intense public policy debates over the financing of the cost of its research, the veracity of claims for its products, the prices charged for them (not to mention who pays those charges), and the socially optimal degree of patent protection.