Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Thursday, November 19, 2009

Monopoly Pricing of an Antibiotic Subject to Bacterial Resistance

Posted by D. Daniel Sokol

Markus Herrmann (Department of Economics, CRÉA, GREEN and CIRPÉE, Université Laval) writes on Monopoly Pricing of an Antibiotic Subject to Bacterial Resistance.

ABSTRACT: We develop a dynamic bio-economic model of bacterial resistance and disease transmission in which we characterize the pricing policy of a monopolist who is protected by a patent. After expiration, the monopolist behaves competitively in a generic industry having open access to the common pool of antibiotic efficacy and infection. The monopolist manages endogenously the levels of antibiotic efficacy as well as the infected population, which represent quality and market size respectively and achieves, at least temporarily, higher such levels than a hypothetically myopic monopolist who does not take into account the dynamic externalities. The pricing policy and the biological system are characterized by the turnpike property. Before the patent vanishes, the monopolist behaves more and more myopically, leading to a continuous decrease in the price of the antibiotic. Once the generic industry takes over, a discontinuous fall ! in price occurs. Whether a prolongation of the patent is socially desirable depends on the relative levels of antibiotic efficacy and infection.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/11/monopoly-pricing-of-an-antibiotic-subject-to-bacterial-resistance.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0120a663964d970b

Listed below are links to weblogs that reference Monopoly Pricing of an Antibiotic Subject to Bacterial Resistance:

Comments

Post a comment