[Ip-health] New York Fed Staff Report: What Do Drug Monopolies Cost Consumers in Developing Countries:

Michael Palmedo mpalmedo at wcl.american.edu
Wed Oct 29 06:38:47 PDT 2014

What Do Drug Monopolies Cost Consumers in Developing Countries?

Rebecca Hellerstein

Federal Reserve Bank of New York
Staff Report no. 530, December 2011


... Conclusion:

This paper compares markups on ARV's in countries with monopolistic drug
markets to those with more widespread availability of generics. It finds
that for ARV's with an average per-capsule price of $0.65, consumers in
competitive countries paid $0.12 more per capsule due to their greater
purchasing power than did consumers in monopolistic countries and, more
generally, that every $100 increase in per-capita income corresponded to
a 1-cent (about a 1.5-percent) increase in the average per-capsule
price. The paper also finds that consumers in monopolistic countries
paid on average $0.50 more per capsule owing to firms' exercise of their
monopoly power than did consumers in competitive countries. These
results suggest a fairly modest responsiveness of ARV prices to
consumers' purchasing power and a somewhat more robust responsiveness to
firms' monopoly power. In the end, richer nations may pay a little more
for drugs, but a lot more if a monopolist is supplying them. Finally,
the paper's empirical approach and markup estimates may be useful for
other researchers as they evaluate the impact of granting monopoly
rights on prices, and consumers, in developing countries.

Mike Palmedo
Program on Information Justice and Intellectual Property
American University Washington College of Law
4801 Massachusetts Ave., NW, Washington, D.C. 20016
W: 202-274-4442 | M: 571-289-3683
pijip.org | infojustice.org | us.creativecommons.org

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