4 a List the costs and benefits of the following hypothetica

4. (a) List the costs and benefits of the following hypothetical policies. (i) The U.S. government offers a S5 billion prize to the first drug company that develops a cure for Alzheimer\'s disease. (ii) The patent length for drugs to treat fatal diseases is reduced to five years, and all current patents for such drugs that are already more than five years old instantly expire. (ii) The European Medicines Agency announces that it will instantly approve new drug applications that have shown any disease (also known as mad cow disease), even if there are safety concerns or if the evidence of efficacy is not conclusive. iv) The U.S. government allows patients to write themselves prescriptions on weekends, when physicians are typically not available. promise in treating Creutzfeldt-Jakob (b) Suppose a drug manufacturer with a patent on a drug is a monopolist in two markets, A and B. The demand functions in the two markets are, respectively: (pa) 300.000-5,000pA qB(PB240,000-8,000pB where qA and q denote the num prices. Assume that resale or arbitrage between the markets is impossible and that marginal cost is c $2 in both markets. There are no fixed costs. Find firm\'s profit-maximizing prices, quantities, and profits. Suppose instead that resale is possible and that drugs can costlessly be transported between the markets. What is the firm\'s profit in this case? nber of prescriptions and pA and pB are the unit

Solution

4 i) The US government offers a $5 billion prize to the first drug company that develops a cure for Alzheimer\'s disease.

Announcing a $5 billion prize would motivate many of the pharmaceutical companies to increase their R&D activity and develop a cure for a deadly Alzheimer disease which is for the benefit of the society.
it would raise the R&D expenditure of the comapny and puts an additional $5 billion financial burden on the government.

ii) The patent length for drugs to treat fatal diseases is reduced to five years , and all current patents for such drugs that are already more than five years old instantly expire.

As a result,new competitors will enter into manufacturing of similar drugs after five years and thus the availability of such drugs would be more at a reasonable price. Customers will have more number of options and thus treatment becomes better.

It would raise the problems for the company which has gone for patents as it would not be able to recover maximum profits as the period of patents has been reduced.

iii) The European Medicines agency announces that it will instantly approve new drug applications that have shown any promise in treating Creutzfeldt - Jakob disease ,even if there are safety concerns or if the evidence of efficacy is not conclusive.

It will motivate all the drug manufacturers to develop drugs as the approval measures are very soft and flexible. There would be more number of options available for the patients.

As no attention is being paid to safety measures, so companies would take undue advantage and play with the lives of the patients by making sub-standard drugs available to them . Patients life would be at risk and they would be losing out.

iv) The US government allows patients to write themselves prescriptions on weekends, when physicians are typically not available.

It will bring ease to the patients as they dont have to suffer over the weekends for the treatment of common diseases which can be handled by them easily. They can have their own prescription and thus get the remedial medicines for their suffering.

It would lead to higher crime rates as public would take undue advantage and purchase the drugs which might lead to serious repurcussions.