Global Drug Diffusion and Innovation with the Medicines Patent Pool

Abstract

This paper studies the impact of the first joint licensing platform for patented drugs, the Medicines Patent Pool, on global drug diffusion and innovation. The pool allows generic firms worldwide to license 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 that the pool leads to substantial increases in the generic supply of drugs purchased. In addition, R&D inputs and outputs respond positively overall. The estimated benefits to consumers and firms far exceed the operating costs.

Keywords: patent pool, drug bundling, innovation and diffusion

JEL Classification: O3, K2, I1