BPEA | 1991: Microeconomics

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

Michael D. Whinston,
Michael D. Whinston Harvard University and National Bureau of Economic Research
Richard E. Caves, and
Richard E. Caves Harvard University
Mark A. Hurwitz
Mark A. Hurwitz Columbia Law School

Microeconomics 1991

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.