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On Conflicts between Pharmaceutical Patent Protection and the Right to Life and Health Based on a Stackelberg Game

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  • Chunming Xu

    (Shanghai International College of Intellectual Property, Tongji University, Shanghai 200092, China)

  • Debao Zhu

    (School of Management, Shanghai University, Shanghai 200444, China)

Abstract

To solve the conflict between pharmaceutical patent protection and the right to life, health and increased patient satisfaction, drug prices can be regulated by levying an excess profit tax. An optimal tax strategy was formulated that not only could lower drug prices and improve public health and welfare, but also considers companies’ earnings. The strategy was based on the Stackelberg game theory as a bi-level mathematical model. In the model, the government is the leader, with patient satisfaction as the main goal, and pharmaceutical companies are the followers, with maximum drug revenue as the goal. The results show that under the premise of ensuring sufficient incentives for patent holders, the optimized tax on excess profit can effectively compensate for the shortcomings of pharmaceutical patent protection, alleviate the failure of market regulation of drug prices, improve patient satisfaction, and increase total social welfare.

Suggested Citation

  • Chunming Xu & Debao Zhu, 2021. "On Conflicts between Pharmaceutical Patent Protection and the Right to Life and Health Based on a Stackelberg Game," IJERPH, MDPI, vol. 18(3), pages 1-13, January.
    • Handle: RePEc:gam:jijerp:v:18:y:2021:i:3:p:1119-:d:488068
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    References listed on IDEAS

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    2. Swathi Iyengar & Kiu Tay-Teo & Sabine Vogler & Peter Beyer & Stefan Wiktor & Kees de Joncheere & Suzanne Hill, 2016. "Prices, Costs, and Affordability of New Medicines for Hepatitis C in 30 Countries: An Economic Analysis," PLOS Medicine, Public Library of Science, vol. 13(5), pages 1-22, May.
    3. Mehmet Sekip Altug & Ozge Sahin, 2019. "Impact of Parallel Imports on Pricing and Product Launch Decisions in Pharmaceutical Industry," Production and Operations Management, Production and Operations Management Society, vol. 28(2), pages 258-275, February.
    4. Eric W Bond & Kamal Saggi, 2017. "Price controls versus compulsory licensing: effects on patent-holders and consumers," Vanderbilt University Department of Economics Working Papers 17-00013, Vanderbilt University Department of Economics.
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