Can Patent Duration Hinder Medical Innovation?
17 Pages Posted: 29 Oct 2011 Last revised: 13 Jan 2016
Date Written: October 28, 2011
We argue that, in the pharmaceutical industry, excessive patent duration can deter investments in innovative treatments in favor of me-too drugs. The point is that too-long durations foster incentives to collude to delay investments in R&D for innovative treatments. We give a set of sufficient conditions for which collusion is a subgame-perfect equilibrium. We then show that reducing current duration always breaks down market discipline, and so does an increase in duration for innovative treatments.
Keywords: market collusion, patent duration, medical innovation
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