Answer

Patent Monopoly and High Drug Prices in the United States

            The United States of America pays considerably higher prices compared to the rest of the developed world for prescription drugs because of limited competition amongst drugs firms or companies. The country has also set up regulatory apparatus that mainly focuses on drug safety; nevertheless the regulators have not been able to underscore cost-effectiveness when it comes to both existing and new and drugs. The limited number of companies alongside the numerous regulations has led to monopoly in the drug industry. Monopoly is characterized with profit maximization without taking into account consumer welfare. Because only a single firm has the patent right to manufacture, it is evident that it will set drug prices as high as possible to make supernormal profits.

The honest explanation for the high prices of drugs in the United States is, therefore, monopoly pricing. It is clear that via Food and Drug Administration marketing exclusivity and patent protection, the United States government is granting the pharmaceutical firms a monopoly on brand-names drugs, knowing very well that monopoly is a recipe for disproportionate or high prices. The monopolies can sometimes ensure reduced production of drugs with an aim of reducing supply which in turn increases prices and subsequently revenue. Each time the Congress attempts to debate drug prices, the industry volubly claim that lowering prices of drugs will significantly impede innovative research. Even though the argument may be germane, the patent rights that United States government has given to the drug industry makes it to control the prices of drugs without the government’s input. The lack of competition between drug manufacturers as a result of issuance of patent rights is the primary cause of higher drug prices in the United States.