Technology Transfer In Prescription Drug Market

Nowadays,infectious diseases such as HIV and tuberculosis have become a public issue that seriously affects human health,particularly,in developing countries and underdeveloped countries.However,drug patents affect the availability of drugs for patients,making the price of drugs in low and middle income countries be higher than that in developed countries.The application of compulsory licensing alleviates the problem to a certain extent,but also raises a number of serious problems,such as reducing profits of the brand name drug manufacturers,reducing investment capacity,lagging in the pharmaceutical industry,weakening competition in the pharmaceutical market,and so on.Of course,the brand name drug manufacturers can obtain a certain amount of compensation.However,there is no uniform international standard for reference.Therefore,the conflict between the pharmaceutical research and development and affordable prices of drugs is not well resolved.In order to solve this conflict,this paper studies the voluntary transfer between the brand drug manufacturers in developed countries and the manufacturers in developing countries.In the prescription drug market,we put forward a duopoly model.We consider two innovation type(quality-improving and cost-reducing)and three different technology transfer contract mechanisms(fixed-fee contract,royalty contract and two-part tariff contract),and the paper compares profits of the brand drug manufacturers from developed countries and the common drug enterprises from developing countries in the market where there are not transfer and the market after transfer on the different contracts.Then,we discuss the conditions for the implementation of each transfer contracts,and the optimal decision of the brand drug manufacturer from the developed country.At the same time,the paper analyzes the patient's surplus and social welfare in the importing country,and provides a reasonable reference for the compulsory compensation standard.We find that:the product differentiation and the agent behavior of doctor have a deep influence on the technology transfer decision of the manufacturer from the developed country.(1)In the case of quality-improving innovation and non-drastic innovation of cost reduction innovation,when the degree of technological innovation is relatively low,manufacturers in developed countries can use any contracts to transfer their technology.(2)In the use of different technology transfer contracts,we found that all contracts can increase the patient surplus,but royalty contract and two-part tariff contract may reduce the importing country's social welfare.(3)If the innovation type is quality improvement,the two charging contracts will be equal to the fixed fee or the royalty contract under certain conditions.If the innovation type is cost reduction,the two charges will be equal to the fixed fee contract under certain conditions.(4)In the case of drastic innovation in cost reduction,it is different from the previous literatures which suggest that the technology transfer would not occur due to the monopoly.It is now found that manufacturers in developed countries will also carry out technology transfer because of the differences in the agent behavior of the doctors.The conclusion of this paper is of great significance to the choice of the optimal transfer strategy for the manufacturers in developed countries,and the rational introduction of advanced technology for developing countries.The study concludes that,taking into account the commercial interests of patent holders,policies could be modified to make medicines more accessible in the public health crisis.