Working Paper: NBER ID: w17249
Authors: Tamara Hafner; David Popp
Abstract: As countries reform their patent laws to be in compliance with the Trade Related Intellectual Property Rights Agreement, an important question is how increased patent protection will affect drug prices in low-income countries. Using pharmaceutical trade data from 1996 to 2005, we examine the role of China and India as suppliers of medicines to other middle- and low-income countries and evaluate the competitive effect of medicine imports from these countries on the price of medicines from high- income countries. We find that imports of antibiotics and unspecified medicaments from India and China significantly depress the average price of these commodities imported from high-income trading partners, suggesting that India and China are not only important sources of inexpensive medicines but also have an indirect effect by lowering prices through competition. As India is the leading supplier of medicines in Sub-Saharan Africa, this region will likely be affected most adversely.
Keywords: affordable medicines; China; India; developing countries; pharmaceutical trade
JEL Codes: I10; O10; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Imports from India and China (F14) | Average price of pharmaceuticals from high-income countries (P22) |
| One percentage point increase in imports from India and China (F69) | Average price decrease of pharmaceuticals (E30) |
| Imports from India and China (F14) | Average price of antibiotics and unspecified medicaments from high-income countries (P22) |
| Imports from India (F14) | Average price of pharmaceuticals in sub-Saharan Africa (O55) |