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The Value of Patent Expiration

Author

Listed:
  • McKellar Michael R.

    () (Harvard Medical School)

  • Frank Matthew

    () (Harvard University)

  • Huskamp Haiden

    () (Harvard Medical School)

  • Chernew Michael E.

    () (Harvard Medical School)

Abstract

Despite bringing breakthrough medications to market, pharmaceutical companies incurred criticism during the 1990s and early 2000s because of high prices of many drugs. We argue that the benefits of pharmaceuticals should be evaluated in a dynamic context that extends beyond the patent expiration date. Now that numerous patents have expired, generic medications exist in many important drug classes. Thus, consumers reap the benefits of past innovation for years to come. We estimate that across 19 molecules whose patents expired from 2005-2009, $193-436 billion will transfer to consumers over 10 to 20 years due to patent expiration. This suggests that, while prices were high during the patent period, creating an incentive for innovation, the transfers to consumers after patent expiration are significant, which is how the patent system is designed to function.

Suggested Citation

  • McKellar Michael R. & Frank Matthew & Huskamp Haiden & Chernew Michael E., 2012. "The Value of Patent Expiration," Forum for Health Economics & Policy, De Gruyter, vol. 15(2), pages 1-13, November.
  • Handle: RePEc:bpj:fhecpo:v:15:y:2012:i:2:p:1-13:n:8
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    References listed on IDEAS

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    1. Anupam B. Jena & John E. Calfee & Edward C. Mansley & Tomas J. Philipson, 2009. ""Me-Too" Innovation in Pharmaceutical Markets," NBER Chapters,in: Frontiers in Health Policy Research, volume 12 National Bureau of Economic Research, Inc.
    2. Philipson Tomas J & Jena Anupam B, 2006. "Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs," Forum for Health Economics & Policy, De Gruyter, vol. 9(2), pages 1-33, January.
    3. Marin C. Gemmill & Joan Costa-Font & Alistair McGuire, 2007. "In search of a corrected prescription drug Elasticity estimate: a meta-regression approach," Health Economics, John Wiley & Sons, Ltd., vol. 16(6), pages 627-643.
    4. Mansley Edward C & Teutsch Steven M & White Dawn M & Busza Jamie D & Geisel Steven S, 2008. "The Utilization of Medicines beyond Patent Expiration," Forum for Health Economics & Policy, De Gruyter, vol. 11(2), pages 1-21, November.
    5. repec:mpr:mprres:5585 is not listed on IDEAS
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    Cited by:

    1. Cook, J.P, 2014. "Real Option Value and Path Dependence in Oncology Innovation," Seminar Briefings 000077, Office of Health Economics.

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