When a pharmaceutical company develops a new drug, it often receives patent prot

Question

When a pharmaceutical company develops a new drug, it often receives patent protection for that medication, allowing it to charge a higher price. Explain how this public policy of providing patent protection might help align the corporation's interests with society's interests.

(Select all the choices that apply.)

A. Without patent protection, drug manufacturers would be less willing to spend as much on R&D to develop new drugs and drug innovation would be curtailed.

B. Without patent protection, the developer of the drug would be forced to lower prices to compete with generic manufacturers.

C. Without patent protection, the developer of the drug would be forced to raise prices to compete with generic manufacturers.

D. It is in our interest as a society that new and improved drugs be developed, despite the fact that the development and testing process can be a very expensive and lengthy process.

Click to select your answer(s).

Explanation / Answer

Option A,B & D

Without patent protection, the developer of the drug would be forced to lower prices to compete with generic manufacturers. As price competition would reduce expected future profits, developer would be less willing to spend in R&D to develop the drug, & thus drug innovation would be reduced. But if we allow developers to earn higher profits (commensurate with value of drug to society) by providing patents , they would be interested to spend more on R&D, & drug innovation would be enhanced. Hence, patent protection would align the interests of corporation and society & provide for increased efficient spending on R&D.

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