Question

what is the determines the value of cure for acne? For ALS (amyloid lateral sclerosis, or Lou Gehrig's disease)? Which discovery is worth more to a pharmaceutical firm that is able to patent a cure? Explain your answer.

Answer 1

There are three factors that determine the economic value of any cure-

1. The market- What is the size of the market? The larger the size, the higher the revenue.
2. Profit margin- Net earning. It is revenue per tablet/cream-cost per tablet/cream. The higher the net margin, the higher the profits.
3. Alternatives- Are there any alternatives available. The more the alternatives, the lesser the profit.

We can see that acne has far bigger market (much higher number of poeple haveacne than ALS), but lesser profit margins (people will not pay high for acne treatment but will pay huge amounts for ALS treatment) and has more alternatives (there are many many creams available for Acne in the market but no cure for ALS).

Looking at above, it makes sense that a patented cure for ALS would ob more profitable overall as it has much higher profit margins and no alternatives.