English to Arabic Medical Law: Contract(s) pharmaceutical industry

In the period up to 1960, a key development was that innovative companies began to exclusively produce products themselves, without licensing them to others. This enabled them to restrict output and generate larger profits. A practice of licensing with high royalty payments could potentially have delivered the same profits to these innovator companies, but such royalty payment rates would have had to be very high in the face of inelastic demand (i.e. consumers’ demand for a product does not change appreciably in response to a one-per-cent increase in price). By one estimate, when demand is inelastic, the royalty rate required to yield a return equivalent to an exclusive, single supply model would be 80 per cent (Temin, 1979). Relatedly, one estimate of the wholesale price of tetracycline, before the introduction of generic versions of this medicine in the United States, was US$ 30.60 per 100 capsules, whereas the production cost for the same quantity was just US$ 3.00, thus generating a profit rate of 90 per cent. Such high royalty rates would have been commercially unacceptable as royalty rates at that time were typically just 2.5 per cent. Apart from being the rate at which streptomycin was licenced, the 2.5-per-cent rate would have also applied in a US Federal Trade Commission (FTC) decision relating to a compulsory licence for tetracycline. However, this FTC decision did not subsequently enter into force for other reasons (Scherer and Watal, 2002).