IDEAS home Printed from https://ideas.repec.org/a/eee/irlaec/v32y2012i1p188-195.html
   My bibliography  Save this article

On price discrimination, parallel trade and the availability of patented drugs in developing countries

Author

Listed:
  • Mazumdar, Mainak
  • Banerjee, Dyuti S.

Abstract

This paper examines the effect of product Patent Act and parallel trade on the availability of an essential drug in the developing countries. Price discrimination by a Multinational Corporation (MNC) alleviates the problem of non-availability of the drug in a developing country compared to uniform pricing strategy. Incorporating an upstream–downstream market structure we show that in the presence of parallel trade ‘a form of arbitrage’ by traders the MNC cannot successfully discriminate the prices for its product. The analysis however, indicate that if the market size of the developing nation is relatively large, then with Cournot competition among the traders, the manufacturer earns higher profit by allowing parallel trade than by perfectly discriminating the prices for its product. Under Bertrand competition, the strategy to allow parallel trade always dominates the strategy to restrain it.

Suggested Citation

  • Mazumdar, Mainak & Banerjee, Dyuti S., 2012. "On price discrimination, parallel trade and the availability of patented drugs in developing countries," International Review of Law and Economics, Elsevier, vol. 32(1), pages 188-195.
    • Handle: RePEc:eee:irlaec:v:32:y:2012:i:1:p:188-195
    DOI: 10.1016/j.irle.2012.01.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0144818812000026
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irle.2012.01.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Panos Kanavos & Joan Costa-Font, 2005. "Pharmaceutical parallel trade in Europe: stakeholder and competition effects [‘First report (final) to the Committee on International Trade Law of the International Law Association on the subject o," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 20(44), pages 758-798.
    2. Lanjouw, Jean O., 1997. "The Introduction of Pharmaceutical Product Patents in India: "Heartless Exploitation of the Poor and Suffering"?," Center Discussion Papers 28385, Yale University, Economic Growth Center.
    3. Jean O. Lanjouw, 1997. "Title: The Introduction of Pharmaceutical Product Patents in India: Heartless Exploitation of the Poor and Suffering," Working Papers 775, Economic Growth Center, Yale University.
    4. Jayashree Watal, 2000. "Pharmaceutical Patents, Prices and Welfare Losses: Policy Options for India Under the WTO TRIPS Agreement," The World Economy, Wiley Blackwell, vol. 23(5), pages 733-752, May.
    5. Bale, Harvey, Jr, 1998. "The Conflicts between Parallel Trade and Product Access and Innovation: The Case of Pharmaceuticals," Journal of International Economic Law, Oxford University Press, vol. 1(4), pages 637-653, December.
    6. Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, September.
    7. Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March.
    8. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
    9. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, September.
    10. Marjit, Sugata & Beladi, Hamid, 1998. "Product Versus Process Patents: A Theoretical Approach," Journal of Policy Modeling, Elsevier, vol. 20(2), pages 193-199, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Laura Birg, 2023. "Parallel imports under a manufacturer rebate and a price freeze: Evidence from Germany," Health Economics, John Wiley & Sons, Ltd., vol. 32(2), pages 302-323, February.
    2. Raimondos-Møller, Pascalis & Schmitt, Nicolas, 2010. "Commodity taxation and parallel imports," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 153-162, February.
    3. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    4. Shen Guo & Bin Hu & Hai Zhong, 2013. "Impact of parallel trade on pharmaceutical firm’s profits: rise or fall?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(2), pages 345-355, April.
    5. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    6. Gene M. Grossman & Edwin L.‐C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402, June.
    7. Carsten Fink, 2001. "Patent Protection, Transnational Corporations, and Market Structure: A Simulation Study of the Indian Pharmaceutical Industry," Journal of Industry, Competition and Trade, Springer, vol. 1(1), pages 101-121, March.
    8. Santanu Roy & Kamal Saggi, 2012. "Strategic competition and optimal parallel import policy," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1369-1396, November.
    9. Frank Mueller-Langer, 2014. "Copyright and parallel trade," Chapters, in: Richard Watt (ed.), Handbook on the Economics of Copyright, chapter 16, pages 287-310, Edward Elgar Publishing.
    10. Olena Ivus & Edwin L.-C. Lai, 2017. "Patent Exhaustion Regime and International Production Sharing: Winner and Losers?," CESifo Working Paper Series 6644, CESifo.
    11. Francesco Laforgia & Fabio Montobbio & Luigi Orsenigo, 2007. "IPRs, technological and industrial development and growth: the case of the pharmaceutical industry," KITeS Working Papers 206, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Oct 2007.
    12. Samira Guennif, 2009. "Aids In India," Working Papers id:1974, eSocialSciences.
    13. Laura Birg, 2017. "Externalities of Wholesale Level Regulation under Pharmaceutical Parallel Trade," Economics Bulletin, AccessEcon, vol. 37(3), pages 2260-2273.
    14. Lee Branstetter & Raymond Fisman & C. Fritz Foley, 2005. "Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence from U.S. Firm-Level Data," NBER Working Papers 11516, National Bureau of Economic Research, Inc.
    15. Teodora Cosac, 2004. "Vertical Restraints and Parallel Imports with Differentiated Products," Industrial Organization 0401006, University Library of Munich, Germany.
    16. Tomaso Duso & Annika Herr & Moritz Suppliet, 2014. "The Welfare Impact Of Parallel Imports: A Structural Approach Applied To The German Market For Oral Anti‐Diabetics," Health Economics, John Wiley & Sons, Ltd., vol. 23(9), pages 1036-1057, September.
    17. Laura Birg, 2015. "Externalities of National Pharmaceutical Policy when Markets are Integrated through Parallel Trade," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 558-574, August.
    18. David Granlund, 2022. "Direct and indirect savings from parallel imports in Sweden," Health Economics Review, Springer, vol. 12(1), pages 1-14, December.
    19. Holmes, Peter & Lopez-Gonzalez, Javier & MILE 02, Anirudh Shingal, 2011. "TRIPS and Special & Differential Treatment – Revisiting the Case for Derogations in Applying Patent Protection for Pharmaceuticals in Developing Count," Papers 238, World Trade Institute.
    20. Romana L. Autrey & Francesco Bova & David A. Soberman, 2014. "Organizational Structure and Gray Markets," Marketing Science, INFORMS, vol. 33(6), pages 849-870, November.

    More about this item

    Keywords

    Parallel trade; Patent; Price discrimination;
    All these keywords.

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • K19 - Law and Economics - - Basic Areas of Law - - - Other
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:32:y:2012:i:1:p:188-195. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/irle .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.