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.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 21 (2012)
Issue (Month): 6 (November)
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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
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