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 Perfect 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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 30159.
Date of creation: 2009
Date of revision: 2010
Income Inequality; Intellectual Property Rights; India; TRIPS; Parallel Imports; Pharmaceuticals;
Other versions of this item:
- Rajat Acharyya & María D.C. García-Alonso, 2012. "Parallel imports, drug innovation and international patent protection: A policy game," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(6), pages 865-894, November.
- 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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