Sample Economics Essays on Patents and Pharma

Patents and Pharma

Question 1

A patent is an established set of exclusive rights given by a sovereign government or international organization to an inventor for a limited period of time in order to fully disclose his or her invention to the public (Jorgensen, 2013). Hence, patent rights grants the inventor the rights to prevent others from utilizing, selling, or importing the invention under consideration or its equivalent. Consequently, it conveys a significant benefit to the owner because royalties are paid where the product is copied. Failure to pay royalties to the inventor attracts the closure of production or importation of the infringed product (Jorgensen, 2013). Therefore, this creates a monopoly since it becomes hard for entities to make similar products without paying royalties or without copying the first investor’s idea.

Question 2

When a patent for a technology or any invention ceases to exist, it presents opportunities for other inventors to market their products which they were not able to market before (United States. Federal Trade Commission, 2010). Hence, the market becomes more competitive since investors can apply the idea without worrying of copyright issues. Also, when a patent runs out, anyone can make, use, offer for sale, sell or import the invention without permission from the initial patent owner. Consequently, consumers end up buying the product at a lower price since it is no longer unique (Jorgensen, 2013).

Question 3

Pay-for-delay is a general term used in pharmaceutical companies. The pay for delay agreements have risen as a part of patent litigation agreement settlement between brand names and generic pharmaceutical companies (Edward, 2013). During this period, established brands pay incentives to generic companies to hold their products off the market for a given period of time, usually a cheaper alternative, so that they can instead charge and sell their highly priced products (United States. Federal Trade Commission, 2010). Example, a pharmaceutical company can delay generic competition that lowers prices by agreeing to pay a generic competitor to hold its competing product off the market for a certain period of time. Therefore, the pay-for-delay highly benefit producers since the generic pharmaceutical companies would reap the benefits accompanying the brand name of the big pharmaceutical companies. Consequently, the agreement prevents consumers from accessing cheaper alternatives, thus allowing the producer to reap high profits by selling their original drugs without competition from the cheaper and readily available generic form of the same drug.

Question 4

Pay-for-delay should cease to exist. It deprives of the consumer the opportunity to access a cheaper alternative which creates a monopoly for the producer. Monopolies controls the market and they are the price setter as opposed to a rational or free market where prices are determined by the interaction of demand and supply forces. Consequently, high priced drugs disallow lower income earners from accessing essential medical aid. On the other hand, generic drugs present competition to other companies thus allowing continuous upgrading and improvements of drugs which pose to be beneficial to the consumer. Additionally, with generic drugs on shelves, producers are compelled to lower the prices of the original drugs, hence presents the consumer with a variety of drugs to choose from at a cheaper price.




Edward, W. (June 17, 2013). Supreme Court lets US regulators challenge generic-drug deals. The Washington Post, p. The Washington Post, June 17, 2013. Retrieved from

Jorgensen, P. (2013). Pharmaceuticals, Political Money, and Public Policy: A Theoretical and Empirical Agenda. The Journal of Law, Medicine & Ethics, 41(3), 561-570. Retrieved from

United States. Federal Trade Commission. (2010). Pay-for-delay how drug company pay-offs cost consumers billions: An FTC staff study. Washington, DC: U.S. Federal Trade Commission. Retrieved from