April 2015, Ravi Katari and Dean Baker

Patent monopolies have long been used as a mechanism for financing innovation and research. The logic is that the government awards a monopoly on a product or process for a limited period of time in order to reward innovation. However, in addition to providing incentives for innovation and research, patent monopolies also provide incentives for a wide-range of rent-seeking behaviors, many of which can have major social costs. This paper attempts to calculate one category of these costs for prescription drugs. It produces estimates of the costs associated with mismarketing drugs. The estimates are based on assessments of the costs in the form of increased morbidity and mortality associated with five prominent cases of mismarketing over the last two decades.

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