Quote:
Originally posted by Hank Chinaski
aren't there parallels to Viagra now?* haven't the parallels driven down the cost? Patents were included in the constitution to give incentive to inventors. When inventors attempt to over-profit, then the market tends to ensure parallel products in almost all cases.
*where's bilmore?
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Yes, there are, or so I was told during the super bowl.
You can go read Pfizer's
annual report , which discusses the importance of patent protection.
My point is not that drugs face competition. They do, undoubtedly. How may brands of aspirin are there? But the level of profits for such products are low, and don't provide incentives for R&D into more aspirin, etc. My point, rather, is that companies are geared principally towards capturing the monopoly rents available to a first to market/first to patent on a particular drug. And how you set those monopoly rents are the principle determinant of R&D, not whether they can sell the generic product for 5c or 10c. So, given that those rents are teh prime driver of R&D, you then have to ask whether those rents provide the "right" incentive for innovation.
As for the patent system, I certainly understand the premise. But I don't think you're right about entry. A monopolist prices at the point that maximizes return, and at which raising the price would drive off more customers than it would make up for in higher revenue. Entry is prohibited by the patent system.
