Acharyya, Rajat and Garcia-Alonso, Maria (2009): Parallel imports, drug innovation and international patent protection: a policy game. Forthcoming in: Journal of International Trade and Economic Development
Download (361kB) | Preview
Download (342kB) | Preview
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 Perfect 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.
|Item Type:||MPRA Paper|
|Original Title:||Parallel imports, drug innovation and international patent protection: a policy game|
|English Title:||Parallel imports, drug innovation and international patent protection: a policy game|
|Keywords:||Income Inequality; Intellectual Property Rights; India; TRIPS; Parallel Imports; Pharmaceuticals|
|Subjects:||D - Microeconomics > D4 - Market Structure, Pricing, and Design
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
I - Health, Education, and Welfare > I1 - Health
|Depositing User:||Rajat Acharyya|
|Date Deposited:||06. Dec 2012 13:48|
|Last Modified:||17. Dec 2014 11:49|
Acharyya, R., 2005, Quality discrimination among income constrained consumers, Economics Letters, 86, 245-251.  Acharyya, R. (2008a). Market coverage, price and national welfare under international exhaustion of patents, WP 04-08, International Trade Research Series, UNCTAD-JUECON Programme, Department of Economics, Jadavpur University.  Acharyya, R. (2008b). Income Redistribution Policy and Product Development. India Macroeconomics Annual, 59-79.  Acharyya, R. and Garcia-Alonso, M. D. C. (2008). Parallel imports, innovations and national welfare: role of the sizes of the income classes and national markets for health care, The Singapore Economic Review, 53(1): 1-23.  Acharyya, R. and García-Alonso, M.D.C. (2006) Self-interested motives for international income redistribution and access to health care innovation, European Journal of Political Economy, 22(2): 322-336.  Abbott, F. (2001). The TRIPS agreement, access to medicines and the WTO Doha Ministerial Conference, Occasional Paper 7, Geneva: Quaker United Nations Office.  Chadha, A. (2005). TRIPS and patenting activity: Evidence from the Indian pharmaceutical industry, Working Paper 0512, National University of Singapore.  Chaudhuri, S., Goldberg, P. K. and Jia, P. (2006). Estimating the effects of global patent protection in pharmaceuticals: a case study of Quinolones in India. American Economic Review, 96(5): 1477—1514.  Correa, C. M. (2000a). Integrating public health concerns into patent legislation in developing countries, Geneva: South Centre.  Correa, C. M. (2000b). Intellectual property rights, the WTO and developing countries: the TRIPS agreement and policy options, London: Zed Booths and Penang: Third World Network.  Danzon, P.M. (1998). The economics of parallel trade, Pharmacoeconomics 13: 293-304.  Donnenfeld, S., and Weber, S. (1995) Limit qualities and entry deterrence, RAND Journal of Economics, 26(1): 113-130.  Gabszewicz, J., Thisse, J.-F. (1979). Price competition, quality and income disparities. Journal of Economic Theory 20, 340-359. 23  Gilbert, R. and Shapiro, C. (1990). Optimal patent length and breadth, RAND Journal of Economics, 21: 106-112.  Grossman, G.M. and Lai, E. L.-C. (2008) Parallel imports and price controls RAND Journal of Economics, 39, 2, 378-402.  Ichino, Y. (2004) Parallel imports, quality differentiation and product piracy in a North-South model, SSRN WP, November 2004.  Kovac, E. and Zigic, K. (2007). International competition in vertically differentiated markets with innovation and imitation: trade policy versus free trade, WP 336, Center for Economic Research and Graduate Education, Academy of Sciences of the Czech Republic, Charles University.  Lall, S. (2003). Indicators of relative importance of IPRs in Developing countries, Research Policy, 32: 1657-80.  Li, C. and Maskus, K.E. (2006) The impact of parallell imports on investment in cost-reduding research and development, Journal of International Economics, 37, 167-196.  Lutz, S. (1997). Vertical product differentiation and entry deterrence, Journal of Economics, 65(1): 79-102.  Malueg, D.A., and Schwartz, M. (1994). Parallel imports, demand dispersion and international price discrimination, Journal of International Economics 37: 167-196.  Maskus, K. (2001). Parallel imports in pharmaceuticals: implications for competition and prices in developing countries, Final Report to World Intellectual Property Organization.  Primo Braga, C. (1990) The developing country care for against intellectual property protection”. In Wolfgang E. Siebeck (Ed.), Strengthening Protection of Intellectual Property in Developing Countries: A Survey of the Literature, Washington D.C.: World Bank.  Ramani, S.V., and Maria, A. (2005). TRIPS: Its possible impact on biotech segment of the Indian pharmaceutical industry, Economic and Political Weekly, February, 675-683.  Richardson, M. (2002). An elementary proposition concerning parallel imports, Journal of International Economics 56: 233-45.  Shaked, A., and Sutton, J. (1982). Relaxing price competition through product differentiation, Review of Economic Studies 49, 3-13.  Sohn, S.J. (2008). The two effects of imitation, Economic Modelling, 25: 75-82.