Seminar 13 May, 2013

Intellectual Property Rights and Access to Innovation: Evidence from TRIPS

Abstract
Intellectual property rights (IPRs) require a trade-off between long-run incentives for innovation and short-run access to innovation, i.e. between dynamic and static efficiency. The existence of IPRs may make a market more attractive for innovators, leading to country-specific investments in marketing and distribution. Such investments may result in quicker launch of new products, increased marketing of older products, and greater availability of treatments. However, the market power granted by IPRs allows innovators to charge higher prices, potentially reducing access to patented products. We examine the consequences of pharmaceutical product patents on the speed of drug launch, price, and quantity in 60 countries from 2000-2011. Developing countries were required as part of the World Trade Organization's TRIPS Agreement to implement a minimum level of patent protection within a specified time period, and we use these deadlines as natural experiment for the introduction of IPRs. Our results suggest that product patents are associated with faster launch and higher prices. However, compliance with TRIPS is associated with a decrease in the price premium associated with patent protection, while other measures of access have increased. Due to the use of other policy instruments such as price controls and compulsory licensing, the effect of TRIPS on access may not be as negative as initially feared.