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Investments in Pharmaceuticals Before and After TRIPS

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  • Kyle, Margaret K
  • McGahan, Anita M

Abstract

This paper addresses the relationship between patent protection and investment in the development of new pharmaceutical treatments. The TRIPS Agreement, which specifies minimum levels of intellectual property protection for countries in the World Trade Organization, has increased levels of patent protection around the world. Since patents also have the potential to reduce access to treatments through higher prices, it is imperative to assess whether wider use of patents has led to off-setting benefits, such as research on diseases that particularly affect the poor. Using variation across countries in the timing of patent laws and the severity of disease, we test the hypothesis that increased patent protection results in greater drug development effort. We find that patent protection in high income countries is associated with increases in research and development (R&D) effort; in other words, patent protection works in high-income countries to induce R&D. However, the introduction of patents in developing countries has not been followed by greater R&D investment in the diseases that are most prevalent there. Our results suggest that alternative mechanisms for inducing R&D may be more appropriate than patents for the "neglected" diseases that are concentrated in low-income countries.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8371.

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Date of creation: May 2011
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Handle: RePEc:cpr:ceprdp:8371

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Keywords: health; innovation; Intellectual property; pharmaceuticals; trade policy;

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References

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  1. Grabowski, Henry, 2002. "Patents, Innovation and Access to New Pharmaceuticals," Working Papers 02-28, Duke University, Department of Economics.
  2. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," Levine's Working Paper Archive 228400000000000002, David K. Levine.
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  5. Lanjouw, Jean O. & Cockburn, Iain M., 2001. "New Pills for Poor People? Empirical Evidence after GATT," World Development, Elsevier, vol. 29(2), pages 265-289, February.
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  7. Ginarte, Juan C. & Park, Walter G., 1997. "Determinants of patent rights: A cross-national study," Research Policy, Elsevier, vol. 26(3), pages 283-301, October.
  8. Frank R. Lichtenberg & Joel Waldfogel, 2003. "Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act," NBER Working Papers 9750, National Bureau of Economic Research, Inc.
  9. Jean O. Lanjouw, 2003. "Intellectual Property and the Availability of Pharmaceuticals in Poor Countries," NBER Chapters, in: Innovation Policy and the Economy, Volume 3, pages 91-130 National Bureau of Economic Research, Inc.
  10. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
  11. Henry Grabowski, 2002. "Patents, Innovation and Access to New Pharmaceuticals," Journal of International Economic Law, Oxford University Press, vol. 5(4), pages 849-860, December.
  12. Wesley M Cohen & Richard R Nelson & John P Walsh, 2003. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)," Levine's Working Paper Archive 618897000000000624, David K. Levine.
  13. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2005. "Setting the record straight on setting the record straight: Response to the Light and Warburton rejoinder," Journal of Health Economics, Elsevier, vol. 24(5), pages 1049-1053, September.
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Cited by:
  1. Emmanuelle Auriol & Sara Biancini & Rodrigo Paillacar, 2013. "Universal Intellectual Property Rights: Too Much of a Good Thing?," CESifo Working Paper Series 4292, CESifo Group Munich.

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