Thursday, May 22, 2008

More on Bessen/Meurer

In a post Maybe It Isn't Going to Get Much Better, Patent Docs discusses Bessen/Meurer.

Patent Docs refers to Professor Wegner who questions some of the implausible numbers found in the Bessen/Meurer book:

Further, Professor Wegner notes that when Eli Lilly and Company lost its patent on ProzacĀ® in 2001, "its market cap dropped $36 billion in one day, roughly triple what the authors say is the annual profit for the entire pharmaceutical and chemistry industries in one year." He also identifies the reason for this discrepancy: "the auhors have explained the seemingly low figure of $15 billion in annual patent profits in pharmaceuticals and chemicals by stating that their figures are calculated based upon "patent 'rents' not sales and not patent value. . . . In economic theory it is the rents from patents, not the associated sales, that provide the reward to inventors." One way of looking at this analysis is to say that patent rents are the measure of the difference between the profits that are made with patent protection and the profits that would be made in the absence of patents. Another way is to recognize that it assumes that there would be profits for pharmaceuticals in the absence of patents, an analysis that ignores the reality that pharmaceutical companies (and their investors) need patents to ensure sufficient return on investment (ROI) necessary to justify the risk created by the supranormal costs of bringing a drug to market.

See also

Legal symposium on Bessen/Meurer book on March 29

[In passing, Professor Heald of UGeorgia never responded to my email.]


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