Parallel imports, drug innovation and international patent protection: A policy game

We consider a policy game between a high-income country hosting a drug innovator and a low-income country hosting a drug imitator. The low-income country chooses whether to enforce an International Patent Regime (strict IPR) or not (weak IPR), and the high-income country chooses whether to allow par...

Full description

Saved in:
Bibliographic Details
Published in:The journal of international trade & economic development 2012-12, Vol.21 (6), p.865-894
Main Authors: Acharyya, Rajat, García-Alonso, María D.C.
Format: Article
Language:English
Subjects:
Costs
Economic models
Equilibrium
Game theory
Imports
Income inequality
India
Innovations
Intellectual property rights
Low income groups
parallel imports
Patent law
Pharmaceutical industry
pharmaceuticalsJEL Classifications: D4, L1, I1
Studies
TRIPS
Welfare economics
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We consider a policy game between a high-income country hosting a drug innovator and a low-income country hosting a drug imitator. The low-income country chooses whether to enforce an International Patent Regime (strict IPR) or not (weak IPR), and the high-income country chooses whether to allow parallel imports (PI) of on-patent drugs or market-based discrimination (MBD). We show that, for a moderately high imitation cost, both (strict IPR, PI) and (weak IPR, MBD) emerge as the subgame prfect Nash equilibrium (SPNE) policy choices. For relatively smaller imitation costs, (weak IPR, MBD) is the unique SPNE policy choice. The welfare properties reveal that although innovation may be higher at the (strict IPR, PI) policy regime, the market coverage and national welfare of the low-income country, and the total welfare are all lower. This opens up the efficiency issue of implementing TRIPS and at the same time allowing international exhaustion of patent rights.
ISSN:0963-8199
1469-9559
DOI:10.1080/09638199.2010.541273