The Effects of Patent Extension and Take-Back on Green

• 成果类型: Article
• 署名作者: Shi, Tianqin; Petruzzi, Nicholas C.; Chhajed, Dilip
• 署名单位: California State University System; San Jose State University; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; Purdue University System; Purdue University
• 刊物名称: M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1523-4614
• DOI: 10.1287/msom.2021.1009
• 发表日期: 2022
• 页码: 810-826
• 关键词: green pharmacy; patent extension; take-back regulation

摘要

Problem definition: The eco-toxicity arising from unused pharmaceuticals has regulators advocating the benign design concept of green pharmacy, but high research and development expenses can be prohibitive. We therefore examine the impacts of two regulatory mechanisms, patent extension and take-back regulation, on inducing drug man-ufacturers to go green. Academic/practical relevance: One incentive suggested by the Euro-pean Environmental Agency is a patent extension for a company that redesigns its already patented pharmaceutical to be more environmentally friendly. This incentive can encour-age both the development of degradable drugs and the disclosure of technical information. Yet, it is unclear how effective the extension would be in inducing green pharmacy and in maximizing social welfare. Methodology: We develop a game-theoretic model in which an innovative company collects monopoly profits for a patented pharmaceutical but faces competition from a generic rival after the patent expires. A social-welfare-maximizing reg-ulator is the Stackelberg leader. The regulator leads by offering a patent extension to the in-novative company while also imposing take-back regulation on the pharmaceutical indus-try. Then the two-profit maximizing companies respond by setting drug prices and choosing whether to invest in green pharmacy. Results: The regulator's optimal patent ex-tension offer can induce green pharmacy but only if the offer exceeds a threshold length that depends on the degree of product differentiation present in the pharmaceutical indus-try. The regulator's correspondingly optimal take-back regulation generally prescribes a required collection rate that decreases as its optimal patent extension offer increases, and vice versa. Managerial implications: By isolating green pharmacy as a potential target to address pharmaceutical eco-toxicity at its source, the regulatory policy that we consider, which combines the incentive inherent in earning a patent extension on the one hand with the penalty inherent in complying with take-back regulation on the other hand, serves as a useful starting point for policymakers to optimally balance economic welfare considera-tions with environmental stewardship considerations.