Patent Expiration, Entry, and Competition in the U.S. Pharmaceutical Industry

Abstract

THE ETHICAL PHARMACEUTICAL industry is an important one, not so much for its economic size as for the benefits that it delivers to users of its products.The industry has been transformed structurally since the 1940s from a producer of selected chemicals to a research-oriented sector that makes a major contribution to the technology of health care.I Its very success in generating a stream of new drugs with important therapeutic benefits has involved the industry in intense public policy debates over the financing of the cost of its research, the veracity of claims for its products, the prices charged for them (not to mention who pays those charges), and the socially optimal degree of patent protection.The policies and policy debates bearing on competition in the pharmaceutical industry revolve around two interrelated issues of welfare economics.The first is the trade-off between promoting innovative effort and securing competitive market outcomes.The research-oriented We would like to thank Joshua Angrist, Zvi Griliches, Andrea Shepard,