Solving the conflict between accessibility and patent protection of drugs based on public safety

Abstract

The patent system is a double-edged sword: for the pharmaceutical industry, the system stimulates the innovation of R&D subjects, and effectively protects the drugs; for the public, the system facilitates the monopoly of pharmaceutical giants, pushing up the prices of patented drugs. Hence, the patent system results in the conflict between accessibility and patent protection of drugs. This paper explains the necessity of the patent system, identifies the problem of excessively high drug prices induced by patent monopoly, and proposes to regulate drug prices by levying the excess profits tax (EPT). Moreover, the master-slave game model was introduced to quantify the decision-making behaviors of the government and the pharmaceutical enterprise. The results show that the patent system can stimulate innovation in the pharmaceutical industry; as an auxiliary means, a reasonable EPT helps to regulate the prices of patented drugs; a suitable tax burden makes up for the lack of market regulation, and corrects the public losses induced by the monopoly of patent rights, thereby mitigating the conflict between accessibility and patent protection of drugs and enhancing the overall social welfare. The research findings shed new light on government regulation of the pharmaceutical industry.