Patents, Price Regulation and Innovation in the Pharmaceutical Industry

Abstract

The trade-off between property rights/price regulation and innovation depends on country characteristics and drug industry specificities. Access to drugs and innovation can be reconciled by seven ways that, among others, include: public health strengthening in the countries with the largest access problems (those among the poor with the weakest institutions); public and private aid to make attractive R&D on neglected diseases; price discrimination with market segmentation; to require patent owners to choose either protection in the rich countries or protection in the poor countries (but not both). Regarding price regulation, after a review of theoretical arguments and empirical evidence, seven strategies to reconcile health and industrial considerations are outlined, including: mitigation of the medical profession dependence on the pharmaceutical industry; consideration of a drug as an input of a production process; split drug authorization from public funding decisions; establish an efficiency minimum for all health production inputs; and stop the European R&D hemorrhagia.

Keywords: Pharmaceutical R&D, access to drugs, patents, price regulation, industrial policy, health policy

JEL Classification: I18, D45, P35, K23