Explain how a patent creates a kind of monopoly and the benefits it conveys to the owner.
A patent gives an investor the right to derive benefits from their invention and prevent others from enjoying similar benefits. Once the owner of technology patents it, no other person or institution can make, use, sell, import, or export identical technologies. As a result, the owner can sue and be paid damages by a party that develops and uses a similar product without their authority. Any other person who seeks to use the same technology must get the owner’s authorization. In most cases, the owners demand for payment of royalties for the use of their inventions. The owner of the product enjoys a monopoly over their discoveries since other individuals cannot use it. They decide who to grant permission to use their platforms. The concept is similar to an organization enjoying the privilege of providing a service in an economy without competition (enjoying a monopoly).
Explain what happens in a market when patent protection for technology runs out
When the protection for patent runs out, more companies have permission to produces similar products. Consequently, competition increases, and the supply rise in the market, and if the demand is constant, the prices reduce. As a result, consumers get the products at lower prices. In the pharmaceutical sector, medicine is available at lower costs to people from all backgrounds. As such, they have access to affordable drugs and health care. Thus, running out of patent protection reduces the profitability of a firm but benefits the consumers by getting them equivalent products at lower costs.
Explain the effects of pay-for-delay actions on producers and consumers
Pay-for –the delay is pharmaceutical companies’ behavior to pay off potential competitors to delay selling generic versions of their products for a specific period. The agreements are beneficial to the brand-name pharmaceuticals companies and their generic counterparts. The two parties benefit from the high prices and profits that the brand-name companies get by enjoying a monopoly. Stopping the system is an essential aspect of health care reform that helps reduce the cost of medicines by approximately 90 percent (Wyatt par. 3). When companies sign these agreements, they agree to avoid competing, and in such cases, it is the consumers who lose because the drugs are expensive drugs.
Producers are the greatest losers of stopping the pay-for-delay agreements. Generic drugs provide low-cost alternative pharmaceuticals to consumers. When a generic drug becomes available in a market, medicine prices reduce by 90 percent in a span of six months (Wyatt par.3). Therefore, within a short time of stopping the pay-for-delay, consumers can pay as low as 10 percent of the cost of medicine (Wyatt par.3). Thus, the greatest beneficiaries are consumers. Whenever companies (producers) agree on pay-for-delay, the greatest losers are consumers who have to pay high prices for medicine. However, when producers fail to get the arrangement with the generic companies, they are the greatest losers. A competitive market reduces by more than 90 percent, hurting their profitability.
Discuss whether pay-for-delay tactics should no longer be allowed, or should continue
Pay-for-delays should not be allowed to continue because it makes medicine expensive. At the same time, consumers do not get many choices because the producers enjoy a monopoly over the production of branded products. They should not continue because of the trend disadvantages large sections of the population, especially the elderly and citizens from low-income neighborhoods. At the same time, there is a Supreme Court decision of 2013 denouncing pay-for-delays as illegal practices (Wyatt par. 2). Therefore, they have no basis in law use and not appropriate for use in business transactions.
