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

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Monopoly Econ (Simple)

Convex Demand

South Africa

Figure 3.1 Income by Decile

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SA ARV Demand

Figure 4.1 ARV Demand if Price = 5% Income

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Norway ARV Demand

Profit Maximizing SA

Figure 4.2 Revenue per Quantity Sold (USD)

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Profit Maximizing Norway

Figure 5.2 Revenue per Quantity Sold

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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