Are Medicine Prices High and Unaffordable after Trips? Evidence from Pharmaceutical Industry in India

Abstract

The TRIPS agreement has been one of the most contentious agreements of WTO. The pharmaceutical industry has been central to this debate, especially the case of India, which did not recognize product patents in pharmaceuticals before TRIPS and evolved as a major pharmaceuticals manufacturer and exporter. During the AIDS pandemic when patented products were exorbitantly priced, supply of these drugs from India dramatically made medicines affordable and accessible. After the re-introduction of product patent protection in pharmaceuticals in India in line with the TRIPS agreement, considerable speculation and controversy have surrounded the potential impact. Rather than speculation, this paper examines a comprehensive database covering all the products in the market. We contest the claims that there would be, and there has been little negative impact of TRIPs. Our study shows that firms have started selling products at high and unaffordable prices particularly in some therapeutic groups such as cancer. Cancer is not yet a pandemic like AIDS but it is now recognized as one of the greatest public health challenges globally. Our study highlights the gravity of the situation with several cancer medicines much more expensive than the annual cost of US$ 10,000 per person for HIV/AIDs medicines which led to an international outcry in the early 2000s. Another important finding is that prices are high not only because of legal patent barriers to entry of generics but also because of manufacturing and regulatory barriers especially in biologic products. This has implications for policy intervention to make medicines more affordable for universal healthcare. What is important is not only that flexibilities such as compulsory licensing and price control which TRIPS permits are utilized but also that regulatory barriers are simplified as in the case of biologics.

Keywords: TRIPS, patents, pharmaceuticals, monopolies, prices, biologics

JEL Classification: E64, F13, L43, L81, O34