Trademarks, patents, and the copyrights are legal protections that grant monopoly ownership for a given period of time. For the drugs drug manufacturers receive patent protection they develop. These patents act as a barrier to entry to other firms who could copy the product and sell the drug at a lower price. The twenty year patent permits the producer time to be the exclusive seller in order to recoup the development costs and high research associated with bringing a new drug to market.
Respond to all of the following prompts:
1. Discuss what happens in the market for a drug once the patent expires and why?
2. Given the development costs and high research associated with discovering an effective drug, should drugs be granted patent protection? Why or why not?
3. Explain how would this industry be different if patents did not exist? Do you think it would be better, worse or about the same? Why?
4. Discuss what actions, if any, could the government take to increase competition in the pharmaceutical industry? Explain, would government intervention improve market outcomes?