Investments in Pharmaceuticals Before and after Trips

40 Pages Posted: 3 Nov 2009 Last revised: 29 Oct 2014

See all articles by Margaret Kyle

Margaret Kyle

University of Toulouse 1 - Toulouse School of Economics (TSE)

Anita M. McGahan

University of Toronto - Rotman School of Management

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Date Written: October 2009

Abstract

We examine the relationship between patent protection for pharmaceuticals and investment in development of new drugs. Patent protection has increased around the world as a consequence of the TRIPS Agreement, which specifies minimum levels of intellectual property protection for members of the World Trade Organization. It is generally argued that patents are critical for pharmaceutical research efforts, and so greater patent protection in developing and least-developed countries might result in greater effort by pharmaceutical firms to develop drugs that are especially needed in those countries. Since patents also have the potential to reduce access to treatments through higher prices, it is imperative to assess whether the benefits of increased incentives have materialized in research on diseases that particularly affect the poor. We find that patent protection is associated with increases in research and development (R&D) effort when adopted in high income countries. However, the introduction of patents in developing countries has not been followed by greater investment. Particularly for diseases that primarily affect the poorest countries, our results suggest that alternative mechanisms for inducing R&D may be more appropriate than patents.

Suggested Citation

Kyle, Margaret and McGahan, Anita M., Investments in Pharmaceuticals Before and after Trips (October 2009). NBER Working Paper No. w15468, Available at SSRN: https://ssrn.com/abstract=1498969

Margaret Kyle

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Anita M. McGahan (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-6188 (Phone)

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