Do patents really foster innovation in the pharmaceutical sector? Results from an evolutionary, agent-based model

The role of the patent system in the pharmaceutical sector is highly debated also due to its strong public health implications. In this paper we develop an evolutionary, agent-based model of the pharmaceutical industry to explore the impact of different configurations of the patent system upon innov...

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Bibliographic Details
Published in:Journal of economic behavior & organization 2023-08, Vol.212, p.564-589
Main Authors: Dosi, Giovanni, Palagi, Elisa, Roventini, Andrea, Russo, Emanuele
Format: Article
Language:English
Subjects:
Agent-based models
Innovation
Intellectual property rights
Market power
Pharmaceutical sector
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Summary:The role of the patent system in the pharmaceutical sector is highly debated also due to its strong public health implications. In this paper we develop an evolutionary, agent-based model of the pharmaceutical industry to explore the impact of different configurations of the patent system upon innovation and competition. The model is able to replicate the main stylized facts of the drug industry as emergent properties. We perform policy experiments to assess the impact of different Intellectual Property Rights (IPR) regimes changing the breadth and length of patents. Results tend to point against a strong patent system. Simulation experiments suggest that the extent and duration of patents shall, if anything, be set to minimum levels. This holds even when one assumes a strong response of R&D incentives to appropriability conditions and when taking into account information disclosure effects triggered by patents.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2023.05.039