The Pharmaceutical Industry

Paper Summary:

This paper explains that the intellectual property embodied in a drug is an extremely valuable asset for a pharmaceutical company, and its continued protection is directly related to the company's long-term success or failure. The author points out that Pfizer, the leading pharmaceutical company, has three main business practices and goals, which have overcome successfully the uncertainty in drug development and competitive pressures: (1) Extraordinary portfolio management practices, (2) security of daily management of resources and (3) profitable research and development. The paper relates that, in 1984 Congress passed of the Drug Price Competition and Patent Term Restoration Act, known as the Hatch-Waxman Act, which weakened patent law for pharmaceuticals making it easier for generic copies to enter the market.

Table of Contents
Intellectual Property
Risk and Resource Management
Drug Price Competition and Patent Term Restoration (Hatch-Waxman) Act
Food, Drug and Cosmetic Act
Amendments to the 1938 Food, Drug and Cosmetic Act

From the Paper:

"As a result, a high average level of intellectual property protection is economically beneficial. The benefits of strong intellectual property protection are greater in the pharmaceutical industry than they are in other industries, because pharmaceutical firms rely more on patents to protect intellectual property than firms in other industries. When a drug becomes generic as the result of a lost patent, the price goes down, although the demand may remain the same. A less costly drug decreases profits for a pharmaceutical company, which in turn would use the additional profits to invest in their risk and development fund to search for new medicines and cures. Patent law gives pharmaceutical researchers the basic incentive to conduct research and discover new cures."

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