Economic Justifications for Open Access to Essential Drug Patents
Sean FlynnWashington College of Law
WIPIP 2007
Context
TRIPS (1994) Globalization of pharmaceutical patents
(India 2006) Access to Medicine Movement (north/south) 2001: SA competition complaint against
GSK and BI
Monopoly vs. Competition: AIDS drugs
$0
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$4,000
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Monopoly Econ (Simple)
Convex Demand
South Africa
Figure 3.1 Income by Decile
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Income Decile
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SA ARV Demand
Figure 4.1 ARV Demand if Price = 5% Income
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Quantity (100,000s people)
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ear,
US
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Norway ARV Demand
Profit Maximizing SA
Figure 4.2 Revenue per Quantity Sold (USD)
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Quantity (100,000s of people)
Profit Maximizing Norway
Figure 5.2 Revenue per Quantity Sold
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Quantity (units of 210 people)
Application: SA Competition Law
unlawful for dominant firm to “engage in an exclusionary act . . . if the anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain”
unlawful for a dominant firm to “refuse to give a competitor access to an essential facility when it is economically feasible to do so”
-South African Competition Act Sec. 8(c)
Concluding Questions
Is open licensing better than price discrimination (Danson vs. Scherer)
Is open licensing better than price control (Watal)?
Complexifying the model: fixed costs, marginal costs, marginal revenue.
Deadweight Loss