Working Paper: NBER ID: w20799
Authors: Margaret Kyle; Yi Qian
Abstract: We examine the effect of pharmaceutical patent protection on the speed of drug launch, price, and quantity in 60 countries from 2000-2013. The World Trade Organization required its member countries to implement a minimum level of patent protection within a specified time period as part of the TRIPS Agreement. However, members retained the right to impose price controls and to issue compulsory licenses under certain conditions. These countervailing policies were intended to reduce the potential static losses that result from reduced competition during the patent term. We take advantage of the fact that at the product level, selection into TRIPS "treatment" is exogenously determined by compliance deadlines that vary across countries. We find that patents have important consequences for access to new drugs: in the absence of a patent, launch is unlikely. That is, even when no patent barrier exists, generic entry may not occur. Conditional on launch, patented drugs have higher prices but higher sales as well. The price premium associated with patents is smaller in poorer countries. Price discrimination across countries has increased for drugs patented post-TRIPS and prices are negatively related to the burden of disease, suggesting that countervailing policies to offset expected price increases may have had the intended effects.
Keywords: Intellectual Property Rights; Pharmaceuticals; TRIPS; Drug Launch; Price; Quantity
JEL Codes: I10; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Pharmaceutical patents (L65) | Drug launch speed (C69) |
| Pharmaceutical patents (L65) | Drug pricing (D49) |
| Pharmaceutical patents (L65) | Sales quantities (C69) |
| Drug launch speed (C69) | Likelihood of drug launch (L65) |
| Patented drugs (L65) | Drug prices (P22) |
| Patented drugs in poorer countries (O34) | Price premium (D49) |
| Burden of disease (I12) | Drug prices (P22) |
| TRIPS-required patents (O34) | Earlier launches of new pharmaceutical products (L65) |