Parallel imports, drug innovation and international patent protection: A policy game
AbstractWe consider a policy game between a high-income country hosting a drug innovator and a low-income country hosting a drug imitator. The low-income country chooses whether to enforce an International Patent Regime (strict IPR) or not (weak IPR), and the high-income country chooses whether to allow parallel imports (PI) of on-patent drugs or market-based discrimination (MBD). We show that, for a moderately high imitation cost, both (strict IPR, PI) and (weak IPR, MBD) emerge as the subgame prfect Nash equilibrium (SPNE) policy choices. For relatively smaller imitation costs, (weak IPR, MBD) is the unique SPNE policy choice. The welfare properties reveal that although innovation may be higher at the (strict IPR, PI) policy regime, the market coverage and national welfare of the low-income country, and the total welfare are all lower. This opens up the efficiency issue of implementing TRIPS and at the same time allowing international exhaustion of patent rights.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 21 (2012)
Issue (Month): 6 (November)
Contact details of provider:
Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=104717
Other versions of this item:
- Acharyya, Rajat & Garcia-Alonso, Maria, 2009. "Parallel imports, drug innovation and international patent protection: a policy game," MPRA Paper 30159, University Library of Munich, Germany, revised 2010.
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- I1 - Health, Education, and Welfare - - Health
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2006.
"Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India,"
- Panle Gia & Pinelopi K. Goldberg & Shubham Chaudhuri, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," American Economic Review, American Economic Association, vol. 96(5), pages 1477-1514, December.
- Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2003. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," NBER Working Papers 10159, National Bureau of Economic Research, Inc.
- Rajat Acharyya & María D.C. García-Alonso, 2008. "Parallel Imports, Innovations And National Welfare: The Role Of The Sizes Of Income Classes And National Markets For Health Care," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(01), pages 57-79.
- Malueg, D.A. & Schwartz, M., 1993.
"Parallel Imports, Demand Dispersion and International Price Discrimination,"
93-6, U.S. Department of Justice - Antitrust Division.
- Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November.
- Gene M. Grossman & Edwin C.-L. Lai, 2006.
"Parallel Imports and Price Controls,"
NBER Working Papers
12423, National Bureau of Economic Research, Inc.
- Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, vol. 86(2), pages 245-251, February.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
"Price competition, quality and income disparities,"
CORE Discussion Papers RP
-370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Lall, Sanjaya, 2003.
"Indicators of the relative importance of IPRs in developing countries,"
Elsevier, vol. 32(9), pages 1657-1680, October.
- Sanjaya Lall and Manuel Albaladejo, . "Indicators of the Relative Importance of IPRs In Developing Countries," QEH Working Papers qehwps85, Queen Elizabeth House, University of Oxford.
- Donnenfeld, S. & Weber, S., 1991.
"Limit Qualities and Entry Deterrence,"
92-4, York (Canada) - Department of Economics.
- Lutz, Stefan, 1996.
"Vertical Product Differentiation and Entry Deterrence,"
CEPR Discussion Papers
1455, C.E.P.R. Discussion Papers.
- Stefan Lutz, 1997. "Vertical product differentiation and entry deterrence," Journal of Economics, Springer, vol. 65(1), pages 79-102, February.
- Sohn, Soo Jeoung, 2008. "The Two Contrary Effects of Imitation," Economic Modelling, Elsevier, vol. 25(1), pages 75-82, January.
- 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.
- Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.