patent rent

patent rent

A high price charged for a drug by the firm that markets it during the period when the drug is protected by U.S. FDA–approved market exclusivity.
References in periodicals archive ?
Second, under these general conditions, we show that the incumbent has an incentive to strategically overinvest in advertising in order to negatively affect R&D investments and thereby protect its existing patent rent.
We conclude that, under reasonable assumptions, socially excessive advertising is more likely to occur if there is a stronger persuasive element to advertising, and/or if the patent rent is higher (due to either longer patent periods or a higher regulated drug price).
Using numerical simulations, we also demonstrate that a generous patent system (equivalently, generous drug prices) tends to stimulate marketing incentives relative to R&D incentives, and finally, that our conclusions from the general welfare analysis about the relationship between patent rent and advertising incentives are strongly confirmed, even in a setting where advertising is purely informative.
However, a higher price--or, generally, a more generous patent protection--implies that a larger share of the patent rent is spent on marketing, relative to R&D.
In a recent paper, the Organization for Economic Co-operation and Development found that by far, the largest single factor contributing to the growth of wage inequality over the last three decades was the amount of patent rents earned in a country.