Pharma profits <3

Question 1

logic model of lower prices -> lower revenue is an example of what?

Answer 1

diminishing returns

Question 2

what are diminishing returns ?

Answer 2

adding more input to a process results in more smaller increases in output

Question 3

Finish the statement:
lower prices -> lower revenue ->

Answer 3

less investment in research and development -> less innovation

Question 4

Why do we need patent protection ?

Answer 4

Because Cost of imitation are low

Question 5

what does “Cost of imitation are low” mean ?

Answer 5

a firm that didn’t develop the drug can make a copy relatively easy and at a low cost

Question 6

what are the 3 keys of promotion of innovation ?

Answer 6

1. Intellectual property rights
2. patent system
3. regulation of marketing exclusivity

Question 7

what type of competition exists in pharma profits ?

Answer 7

differential product competition

Question 8

What is differential product competition mean ?

Answer 8

competition between patented drugs for the same medical condition

Question 9

Does profitability influence innovation ?

Answer 9

Yes

Question 10

what are the 2 ways profitability influences innovation ?

Answer 10

1. market size
2. potential for profits

Question 11

What are 3 alterations in demand-side constraints on drug prices and consumer behavior ?

Answer 11

1. More people have coverage for drugs (ex expansion of ACA)
2. Drug insurance has become more comprehensive (by setting maximum out-of-pocket costs an enrollee has to pay)
3. Some drugs (specialty drugs for chronic conditions) are costly

Question 12

What is the relationship between market size and potential for profits ?

Answer 12

Differential competition encourages R&D (research & development) investments where the market size and potential return on investment are greatest

positive relationship/overinvestment