Global Drug Diffusion and Innovation with a Patent Pool: The Case of HIV Drug Cocktails

94 Pages Posted: 2 Aug 2019 Last revised: 11 Jan 2020

See all articles by Lucy Xiaolu Wang

Lucy Xiaolu Wang

Cornell University - Department of Economics

Date Written: January 3, 2020

Abstract

Designed to reward innovation, patent protection often leads to high drug prices that make life-saving medicines unaffordable for patients. This tension further induces increasing patent infringement and invalidation to reduce prices, particularly in developing countries. The situation is serious for treatments that require multiple drugs owned by different firms with numerous patents, notably for HIV. I study the impact of the first joint licensing platform for drug bundling, the Medicines Patent Pool, on global drug diffusion and innovation. The pool allows generic firms worldwide to sublicense drug bundles cheaply and conveniently for sales in a set of developing countries. I construct a novel dataset from licensing contracts, public procurement, clinical trials, and drug approvals. Using difference-in-differences methods, I find robust evidence that the pool leads to a substantial increase in generic supply of drugs purchased. In addition, the branded-drug makers and other entities, such as public institutions, respond to the pool by increasing the number of new clinical trials. The R&D input increase is accompanied by increases in generic drug product approvals. Finally, I estimate a structural model to quantify welfare gains and simulate counterfactuals. The total benefit far to consumers and firms exceeds the associated costs.

Keywords: patent pool, drug bundling, innovation and diffusion, antitrust policy

JEL Classification: O3, K2, I1

Suggested Citation

Wang, Lucy Xiaolu, Global Drug Diffusion and Innovation with a Patent Pool: The Case of HIV Drug Cocktails (January 3, 2020). Available at SSRN: https://ssrn.com/abstract=3426554 or http://dx.doi.org/10.2139/ssrn.3426554

Lucy Xiaolu Wang (Contact Author)

Cornell University - Department of Economics ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.lucyxiaoluwang.com

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