Working Paper: CEPR ID: DP8371
Authors: Margaret K. Kyle; Anita M. McGahan
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.
Keywords: Health; Innovation; Intellectual Property; Pharmaceuticals; Trade Policy
JEL Codes: D22; F13; I11; L65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Patent protection in high-income countries (O34) | Increased research and development (R&D) effort (O32) |
| Increased patent protection (O34) | Increased R&D investment (O39) |
| Introduction of patents in developing countries (O34) | No increase in R&D investment for diseases affecting these regions (O54) |
| Establishment of patent protection (O34) | Increased R&D for diseases prevalent in high-income countries (O32) |
| Current patent regime (O34) | No justification for investment in R&D for neglected diseases (O32) |