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EconS 101 WA 3

Drug Companies and Patents: The Games they Play

Due in NetTutor through the link in Blackboard (learn.wsu.edu) by April 5, by 11:50 pm (PST)

In Chapter 13, Krugman and Wells, discuss patents and how they create a barrier to entry (see pp. 379-380). Also in Chapter 12, Krugman and Wells discuss generic pharmaceuticals and a recent US Supreme Court case brought by the US Federal Trade Commission to halt the “pay-for-delay” tactics sometimes used by pharmaceutical companies to contractually extend the effective patent period of pharmaceutical drugs (see pp. 348-349).

The pay-for-delay tactics are more fully described in Federal Trade Commission, Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions. Staff Study, January 2010. (http://www.ftc.gov/os/2010/01/100112payfordelayrpt.pdf )

A recent Supreme Court outcome is discussed in Edward Wyatt, Supreme Court Lets Regulators Sue Over Generic Drug Deals, New York Times, June 17, 2013. (http://www.nytimes.com/2013/06/18/business/supreme-court-says-drug-makers-can-be-sued-over-pay-for-delay-deals.html?_r=0)

After reading these articles:

1. Explain how a patent creates a kind of monopoly and what benefits a patent conveys to the owner.

2. Explain what happens in a market when patent protection for a technology runs out.

3. Explain the effects of pay-for-delay actions on producers and consumers.

4. Discuss whether pay-for-delay tactics should no longer be allowed, or should continue. Be sure to support your conclusion using economic arguments.

Grading Rubric

Please include your name, instructor’s name (Haseeb Ahmed), course and section number (i.e. EconS 101.04 [MWF 2:10-3 pm], and writing assignment (Assignment 3) on the top of your assignment.

Your essay will be assessed as either “Meets Expectations” or “Needs Improvement.” If your essay meets expectations in both areas, your score will be 100%. A score of Meets expectations in Economic analysis alone will result in a score of 50%. Needs improvement in both areas will result in a score of 0%. If your essay needs improvement, you will be given feedback from NetTutor to help you revise it. You can then re-submit the essay to NetTutor for another try, but you only get one second chance. If you take materials or quotes from sources, you must provide citations/references in a standard citation/reference format.

Criterion	Needs Improvement	Meets Expectations
Writing	The writing is difficult to follow and/or poorly organized. Transition sentences are absent or ineffective. Typos and/or grammatical errors distract the reader. Source material citations/ references needed, but are missing or incorrect.	Ideas are well-organized. Transition sentences effectively connect one idea to the next. The essay is free of typos and grammatical errors. Sources properly cited and referenced.
Economic analysis	Explanation of how a patent is a monopoly does not include benefits to the producer (patent holder) or impact on consumers, or is economically incorrect. Explanation of what happens in the market to both producers and consumers when a patent runs out is economically incorrect, incoherent, or missing. Reasoning for support or rejection of pay-for-delay tactics is not supported by economic reasoning.	Explanation of how a patent is a monopoly includes benefits to the producer (patent holder) and impact on consumers and is economically correct. Explanation of what happens in the market to both producers and consumers when a patent runs out is economically correct and coherent and how pay-for-delay tactics extend patent protect. Reasoning for support or rejection of pay-for-delay tactics is well supported by economic reasoning.