Cap and Dividend

Kollmeyer, Barbara. Novartis prepares for crucial medicines apparent(a) expiry: diary. foxbusiness.com (online), December 31th 2008

Essence of the story
This article talks about the soon-to-be patent expiry for the drug Diovan in 2012. This drug is used to incompatible high-blood pressure and is the leading drug in the market overdue to its patent by Novartis AG. Novartis is now looking into new types of interrogation to counterbalance the loss of this patent, and the enormous drop in gross sales that pass on follow. It is predicted that Novartis AG will lose 21% of its $39.8 in sales, making it a near quarter drop in total sales. The comp both has turned to a new drug called Tovaris. They plan to invest hundreds of millions of dollars in this hypertension pill as well as new drugs to treat wadcer and early(a) diseases. They also plan to flip ones wig aggressively into emerging markets to expand their sales before their patent loss. The analysis will accord with the affect of the patent expiry on this particular drug market.

Economic Analysis
Economically, the loss of a patent generally intend that a market switches from a monopoly to a more hawkish market. A patent is a grant made by a government that gives special rights to the creator of an invention to make, use, and snitch that invention for a set period of time.

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A unattackable becomes an automatic monopoly in any market that they own a patent to. By having the sole rights to sell this product, the firm has bonus to maximize mesh because it has no competition. Therefore, by reducing its end product from QE to Q1, it can effectively increase price from PE to P1 to maximize its profit (Operating at MC=MR). An advantage of having the patent is that the firm can operate at abnormal profit without being shake of having to change its price or output at any given time.

So in 2012, when the patent expires for this drug, new firms will have incentive to enter the market and sell the drug under a generic...If you want to get a ripe essay, order it on our website: Orderessay

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