Title: Putting some numbers on the TRIPS pharmaceutical debate

Authors: Arvind Subramanian

Addresses: International Monetary Fund, Policy Development and Review Department, 700 19th Street, Washington D.C. 20431, USA

Abstract: This paper estimates the changes in prices, profits and social welfare arising from increased patent protection for pharmaceuticals in a number of developing countries. Two market structures are proposed and comparisons are made between the situations where there is no patent protection and after the introduction of patent protection. The monopolist model of the post-patent market structure is refined by introducing a Nash-Bertrand duopoly, with non-patentees acting under compulsory licences and the same comparisons made. Lags between the adoption of legislation and its impact are discussed and the effects of retroactive legislation compared with non-retroactive patenting. Prices of patented drugs in three countries are then compared and possible price changes discussed. Finally, for larger countries, or a group of small countries, the effects of patent protection are calculated for the same scenarios and the incentives for increased research and development examined. The paper concludes that the effects of patent protection are sensitive to assumptions about market structure and price elasticity.

Keywords: TRIPs agreement; pharmaceuticals; patent protection; market structure; rents; extra-normal profits; Nash-Cournot duopoly; price elasticity; marginal production costs; Nash-Bertrand duopoly; retroactive legislation; present value welfare losses; price behaviour; national welfare gains; global welfare gains; social welfare; developing countries; patented drugs.

DOI: 10.1504/IJTM.1995.025626

International Journal of Technology Management, 1995 Vol.10 No.2/3, pp.252 - 268

Published online: 23 May 2009 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article