Can Patent Duration Hinder Medical Innovation?

17 Pages Posted: 29 Oct 2011 Last revised: 13 Jan 2016

Date Written: October 28, 2011

Abstract

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

Suggested Citation

Leoni, Patrick L. and Sandroni, Alvaro, Can Patent Duration Hinder Medical Innovation? (October 28, 2011). Available at SSRN: https://ssrn.com/abstract=1950700 or http://dx.doi.org/10.2139/ssrn.1950700

Patrick L. Leoni (Contact Author)

Kedge Business School ( email )

Domaine de Luminy - BP 921
BP 921
Marseille, PACA 13288
France

Alvaro Sandroni

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5461 (Phone)
847-467-1220 (Fax)

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