Creating R&amp;D Incentives for Medicines for Neglected Diseases

Müller-Langer, Frank

doi:10.1007/978-3-8349-8323-7

Cited by 9 publications

(5 citation statements)

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“…Moreover, in this case, the prices of anarchy would not be necessarily nondecreasing with respect to the total fixed cost of R & D. As another possible extension, the price of anarchy could be evaluated also for other models of parallel trade, such as the ones studied in [8,20,22,33], which are other noncooperative games for which parallel trade actually occurs at equilibrium when it is permitted 17 , and for their possible extensions including the multi-country case, supply quota restrictions, currency differences, and the presence of competitor drugs. The results of such a comparison would be useful to measure the efficiency of the proposed solutions, and to detect when policymakers should change the rules of each game in order to increase the value of the global welfare significantly.…”

Section: Discussionmentioning

confidence: 99%

“…According to [33], the literature about the determinants of parallel trade can be divided into three streams. On one hand, [30,31] focus on the difficulties encountered by multinational companies in prohibiting sales outside the authorized distribution chains.…”

Section: Related Literaturementioning

confidence: 99%

“…Parallel trade and its consequences on the global welfare of the involved countries are also investigated in the literature through various noncooperative game-theoretic models [8,20,31,33,36]. For instance, according to the two-country model developed in [31], restricting parallel trade is always advantageous for the manufacturer, but it may either increase or decrease the global welfare of the two countries.…”

Section: Related Literaturementioning

confidence: 99%

“…However, a different model is used in [20], showing that parallel trade may even increase the profit of a pharmaceutical firm, depending on its bargaining power and on the relative market size of the exporting country with respect to the importing one. In [33], two dynamic noncooperative games are proposed to investigate the equilibrium behavior of a manufacturer located in a country and a distributor belonging to a second country, when parallel trade from the distributor is, respectively, permitted/forbidden. In the first case, it is shown that parallel trade actually does not even occur at equilibrium (i.e., the quantity of the reimported product from the parallel trader is zero), but the threat of potential parallel trade (or parallel trade freedom) influences the equilibrium behavior of both players, changing the equilibrium prices and quantities of the product sold by each of them.…”

Section: Related Literaturementioning

confidence: 99%

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A Comparison of Game-Theoretic Models for Parallel Trade

Gnecco

Tuncay

Pammolli

2018

Int. Game Theory Rev.

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Within the EU Single Market for medicines, differences in drug prices, regulations, and transaction costs may create, under suitable conditions, arbitrage opportunities well before patent expiration, giving an incentive to the occurrence of parallel trade. When this is permitted, parallel traders may obtain a profit from buying drugs in a country where prices are lower, then re-selling them in a country where prices are higher. This phenomenon may cause inefficiencies from a global welfare perspective, and reduce the manufacturers' incentive to invest in Research and Development (R & D). Given this framework, in this paper, we investigate the efficiency (expressed in terms of the price of anarchy) of the subgame-perfect Nash equilibria associated with five dynamic noncooperative game-theoretic models for the parallel trade of pharmaceuticals. We also compare such models with regard to the manufacturer's incentive to invest in R & D. More specifically, first we find in closed form the optimal value of the global welfare of two countries, which is obtained by solving a suitable quadratic optimization problem modeling the decision-making process of a global planner. Then, we use such a result to evaluate and compare the prices of anarchy of five games modeling the interaction between a manufacturer in the first country and a potential parallel trader in the second country. The first three games refer, respectively, to the cases of no parallel trade threat, parallel trade threat, and parallel trade occurrence at equilibrium. Then, we investigate two modifications of the third game, in which its transfer payment from the potential parallel trader to the manufacturer is, respectively, removed/determined by Nash bargaining. For completeness, we also consider a decision-theoretic model of no parallel trade threat. For what concerns the incentive for the manufacturer to invest in R & D, the results of our numerical comparison show that the decision-theoretic model of no parallel trade threat is always the one with the highest incentive, whereas the two game-theoretic models of parallel trade threat/occurrence that do not include the transfer payment provide typically the smallest incentives. Moreover, the latter two models have the largest prices of anarchy (i.e., their equilibria have the smallest efficiencies). From a policy-making perspective, improvements are obtained if suitable countermeasures are taken to help the manufacturer recover from the costs of R & D, such as the inclusion of a transfer payment in the model. Keywords Economic applications of operations research · global welfare optimization · noncooperative game theory · subgame-perfect Nash equilibrium · numerical comparison of efficiency · incentive to invest in Research and Development

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Section: Discussionmentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

See 2 more Smart Citations

A Comparison of Game-Theoretic Models for Parallel Trade

Gnecco

Tuncay

Pammolli

2018

Int. Game Theory Rev.

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“…The flip side of the merry story found in IP textbooks is not one of countries following the trend of so-called advanced economies, joining the global market under the TRIPS standards, and experiencing steady, privately led improvement of their internal indicators. Instead, the tale is a harsh one, where poor countries suffer from costly and inaccessible patents for critical technology (Müller-Langer 2009 ), substandard medicines pose a life threat to patients as a consequence of the permanent pursuit of lower production costs (Caudron et al 2008 ), and generation after generation of people becoming trapped in a poverty cycle that not only affects their immediate economic outcomes but acts as a poverty-promoting force (Hotez 2013 , pp. 11–12).…”

Section: Intellectual Property Theory: Canons and Economic Justificat...mentioning

confidence: 99%

Scarcity, Property Rights, Irresponsibility: How Intellectual Property Deals with Neglected Tropical Diseases

Astone

2022

Law Critique

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The article addresses the role of scarcity in negotiating the relationship between intellectual property, particularly from a legal-economic perspective, and property rights, as understood by transaction cost economics, to shed light on the deadlock faced by those suffering from neglected tropical diseases (NTDs). The consistency of the law and economics fundamentals that support the trade on knowledge goods, namely patents on essential medicines, is put under check by Scott Veitch’s scholarship on legal irresponsibility. The damages that emerge from the operations of the intellectual property system are registered in the novel concept of negative public domain, and are due mainly to the lack of access to treatments that end up being unaffordable, or to innovation that leads to new drugs that is not sufficiently incentivised though price signals. The accountability for such damages is taken into consideration by arguing that the disavowal of responsibility is made possible by the negative public domain, which is balanced by the construction of a positive response through the language of rights. As such, responsibility per se is preserved, evading one instantiation of Teubner’s legal paradoxes, but rendered ineffective by design. In other words, even if the harms endured by those affected by the NTDs can be traced back to the operations of the intellectual property system, there is no one to hold accountable. The main goal pursued through the article is to make such an arrangement explicit, by giving centrality to the notion of scarcity and its interplay between legal and economic theory, alongside the novel concept of negative public domain as a site where the actual consequences of irresponsibility lie, to hopefully inform further critique in subsequent works.

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Global Justice and International Economic Law

Buser

2021

Emerging Powers, Global Justice and International Economic Law

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Creating R&D Incentives for Medicines for Neglected Diseases

Cited by 9 publications

References 0 publications

A Comparison of Game-Theoretic Models for Parallel Trade

A Comparison of Game-Theoretic Models for Parallel Trade

Scarcity, Property Rights, Irresponsibility: How Intellectual Property Deals with Neglected Tropical Diseases

Global Justice and International Economic Law

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