mini project

Economics 100B

Mini-Project #2

Due May 12th at 8 a.m. PST

Spring 2020

Many of the pharmaceutical drugs sold in the U.S. is produced and sold by a sort of government

sanctioned monopoly. Companies that successfully invent a new drug can obtain a patent from the

government which prevents competitors from producing that drug and thus lets the innovator

temporarily enjoy monopoly power. This is creating a lot of issues however, leading many patients in

need of such lifesaving drugs severely indebted, bankrupt, or worse, dead. To read more about the

pharmaceutical patent system you can read the links below, though they’re not meant to be entirely

factually correct or unbiased; they are meant for additional context.

• https://www.nytimes.com/roomfordebate/2015/09/23/should-the-government-impose-drug-

price-controls/end-patent-monopolies-on-drugs

• https://www.forbes.com/sites/robertpearl/2017/01/19/why-patent-protection-in-the-drug-

industry-is-out-of-control/

However, the issue present in the pharmaceutical industry is not pervasive with all industries that enjoy

patent protection.

Question 1: Why is it that the pharmaceutical industry is the problem child when it comes to the patent

system? What is unique about the market for drugs?

Question 2: In many cases, the patent protection given to pharmaceutical innovators creates a perverse

situation in which patients in the U.S. are paying substantially higher prices compared to less wealthy

countries for the exact same drug produced by the same manufacturer. Opponents of Big Pharma argue

that because of this, U.S. patients are indirectly subsidizing the drug for patients from less wealthy

countries by paying substantial markups on domestic drugs. This is buttressed by the fact that it is illegal

to import drugs from abroad. To what extent do you agree or disagree with this argument?