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Optimal intellectual property rights protection during an international health emergency

  • Brown, Drusilla K.
  • Norman, George

We analyze policy options during an international health emergency to provide consumers in least developed countries access to patented life-extending pharmaceuticals. Reliance on property rights exhaustion is shown to be insufficiently flexible and costly to implement. By contrast, the optimal degree of price discrimination can always be achieved with a properly specified tariff. We identify a trade-off between patent length and the relevant optimal tariff rate. If the patent length is too short (too long) there must be an offsetting higher (lower) than socially optimal tariff rate. When patent length can be manipulated as an explicit policy tool we identify a clear policy assignment. The tariff rate should be set to achieve social welfare objectives while the patent length can be used to control the resource cost of innovation.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 42 (2012)
Issue (Month): 6 ()
Pages: 1009-1016

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Handle: RePEc:eee:regeco:v:42:y:2012:i:6:p:1009-1016
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  1. Deardorff, Alan V, 1992. "Welfare Effects of Global Patent Protection," Economica, London School of Economics and Political Science, vol. 59(233), pages 35-51, February.
  2. Patricia Danzon, 1997. "Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(3), pages 301-322.
  3. Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers 93-6, U.S. Department of Justice - Antitrust Division.
  4. 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.
  5. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
  6. Schmalensee, Richard., 1980. "Output and welfare implications of monopolistic third-degree price discrimination," Working papers 1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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