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Pharmaceuticals, Prescription Plans, and Promoting Progress

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dc.contributor.author Grinols, Earl L.
dc.contributor.author Henderson, James W.
dc.identifier.uri http://hdl.handle.net/2104/322
dc.description.abstract Monopoly response to buyers who pay fraction c of the product cost is to raise the buyer price for the initial quantity q0 from p0 to 1/c p0, and adjust to a different price and quantity only if profits are thereby raised further. A 25% prescription drug plan co-payment provision, for example, magnifies the pharmaceutical patent holder’s profits more than a fourfold increase in price at the original output would do. This is detrimental to the adoption and use of prescription drug plans. In addition to the appearance of abusing a prescription drug program, the inducement to patentable pharmaceutical research and development (R&D) cannot be optimal both before and after such a plan’s institution. Possibly it is optimal in neither. This paper describes an efficient incentive plan for R&D that does not depend on monopoly and thus is not an impediment to co-pay provisions that might be part of a prescription drug plan. en
dc.relation.ispartofseries BaylorBusiness Economics: Working Papers Series en
dc.relation.ispartofseries 2004-057-ECO en
dc.subject Research and Development en
dc.subject Prescription Drug en
dc.subject Co-payment en
dc.subject Patent Protection en
dc.subject Intervention Principle en
dc.title Pharmaceuticals, Prescription Plans, and Promoting Progress en
dc.type Working Paper en


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