To solve the conflict between pharmaceutical patent protection and the right to life, health and increased patient satisfaction, drug prices can be regulated by levying an excess profit tax. An optimal tax strategy was formulated that not only could lower drug prices and improve public health and welfare, but also considers companies’ earnings. The strategy was based on the Stackelberg game theory as a bi-level mathematical model. In the model, the government is the leader, with patient satisfaction as the main goal, and pharmaceutical companies are the followers, with maximum drug revenue as the goal. The results show that under the premise of ensuring sufficient incentives for patent holders, the optimized tax on excess profit can effectively compensate for the shortcomings of pharmaceutical patent protection, alleviate the failure of market regulation of drug prices, improve patient satisfaction, and increase total social welfare.
In the pharmaceutical industry, the conflicts mainly exist between innovator drug enterprise and generic drug enterprise, and between enterprises and patients. The first kind of conflicts are about technical innovation, and the latter kind are about public interests. Based on noncooperative game model and theory, this paper analyzes the profit distribution between innovator drug enterprise and generic drug enterprise, highlighting the necessity of patent system in incentivizing the innovation of pharmaceutical enterprises and the problem of high drug prices induced by patent monopoly. Then, the excess profits tax (EPT) was introduced to regulate drug prices and safeguard the medical right of the patients. Further, the authors examined the decision-making motives of pharmaceutical enterprises in the game, and the effect mechanism of taxation. The results show that the patent system should protect both innovator drug enterprise and generic drug enterprise (as the secondary innovator); the system should be supported with taxation to regulate the market prices of drugs, such as to balance innovation with public interests and promote the sustainable development of technology and economy.
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