Legal and Economics Framework for Optimization in Drug Affordability

The discovery of new diseases is frequent and alarming. The health care sector is in continuous need of new drugs to counter these diseases. Drug companies face financial risks and significant costs in drug R&D, which may end in failure. The risks and costs create dilemmas for the drug makers; firms charge high prices for their products to make profits and recover all costs incurred from their failures. Regarding demand, affordability is an issue, as prices can be out of reach for most patients, thus undermining the objective of the ICESCR, which guarantees the rights of the public to equal access to the highest attainable standard of physical and mental health. The clash between consumers and producers in terms of drug pricing makes a good case for government intervention to increase total social welfare and establish a balanced approach to pricing regimes. This study assesses the impact of drug patent extensions and their constraints with an aim to maximise total social welfare.