How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries
To address questions about how stronger patent rights will affect India's pharmaceutical industry, the author simulates the effects of introducing such protection - as required by the World trade Organization Agreement on Trade-Related Intellectual Property Rights (TRIPs) - on market structure...
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| Format: | Publications & Research |
| Language: | en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://hdl.handle.net/10986/21481 |
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okr-10986-214812021-04-23T14:04:02Z How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries Fink, Carsten advertising brand loyalty brand name brand names brands commercialization complex task constant marginal costs consumers cournot competition demand elasticity demand functions developed countries duopoly economic circumstances economic consequences economic theory economies of scale elasticities elasticity of substitution equilibrium exchange rate exclusive rights exports fixed costs imperfect substitutes imports income insurance legislation manufacturing industry marginal cost market behavior market demand market power market segments market share market structure marketing mergers monopolies multilateral trade nash equilibrium patents perfect competition price ceilings price control price controls price increases price index producers product differentiation property rights public health publicity sales substitutes substitution surplus surpluses technical assistance total sales trademarks utility function World Trade Organization WTO patents patent agreements pharmaceutical industry drug industry intellectual property rights drug prices nontariff trade barriers To address questions about how stronger patent rights will affect India's pharmaceutical industry, the author simulates the effects of introducing such protection - as required by the World trade Organization Agreement on Trade-Related Intellectual Property Rights (TRIPs) - on market structure and static consumer welfare. (India must amend its current patent regime by 2005 and establish a transitional regime in the meanwhile.) The mode the author uses accounts for the complex demand structure for pharmaceutical goods. Consumers can choose among various drugs available to treat a specific disease. And for each drug, they have a choice among various differentiated brands. The author calibrates the model for two groups of drugs - quinolonnes and synthetic hypotensives - using 1992 brad-level data. In both groups, a subset of all available drugs was patent-protected in Western Europe but no India, where Indian manufacturers freely imitated them. The simulation analysis asks how the market structure for the two groups of drugs would have looked if India had granted patents for drugs. It does not take account of the fact that stronger patent protection will not apply to existing drugs and that the Indian government might be able to restrain high drug prices by imposing price controls or granting compulsory licenses. Still, the author concludes that if future drug discoveries are mainly new varieties of already existing therapeutic treatments, the effect of stronger patent protection is likely to be small, If newly discovered drugs are medicinal breakthroughs, however, prices may rise significantly above competitive levels and static welfare losses may be large. If demand is highly price-elastic, as is likely in India, profits for transnational corporations are likely to be small, but if private health insurance is permitted in India, reducing the price-sensitivity of demand, patent-holders' profits could increase substantially. In light of the fact that the TRIPS Agreement strengthens patent rights in most developing countries, pharmaceutical companies may do more research on, for example, tropical diseases. 2015-02-23T23:19:51Z 2015-02-23T23:19:51Z 2000-05 http://hdl.handle.net/10986/21481 en_US Policy Research Working Paper;No. 2352 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia India |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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en_US |
| topic |
advertising brand loyalty brand name brand names brands commercialization complex task constant marginal costs consumers cournot competition demand elasticity demand functions developed countries duopoly economic circumstances economic consequences economic theory economies of scale elasticities elasticity of substitution equilibrium exchange rate exclusive rights exports fixed costs imperfect substitutes imports income insurance legislation manufacturing industry marginal cost market behavior market demand market power market segments market share market structure marketing mergers monopolies multilateral trade nash equilibrium patents perfect competition price ceilings price control price controls price increases price index producers product differentiation property rights public health publicity sales substitutes substitution surplus surpluses technical assistance total sales trademarks utility function World Trade Organization WTO patents patent agreements pharmaceutical industry drug industry intellectual property rights drug prices nontariff trade barriers |
| spellingShingle |
advertising brand loyalty brand name brand names brands commercialization complex task constant marginal costs consumers cournot competition demand elasticity demand functions developed countries duopoly economic circumstances economic consequences economic theory economies of scale elasticities elasticity of substitution equilibrium exchange rate exclusive rights exports fixed costs imperfect substitutes imports income insurance legislation manufacturing industry marginal cost market behavior market demand market power market segments market share market structure marketing mergers monopolies multilateral trade nash equilibrium patents perfect competition price ceilings price control price controls price increases price index producers product differentiation property rights public health publicity sales substitutes substitution surplus surpluses technical assistance total sales trademarks utility function World Trade Organization WTO patents patent agreements pharmaceutical industry drug industry intellectual property rights drug prices nontariff trade barriers Fink, Carsten How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries |
| geographic_facet |
South Asia India |
| relation |
Policy Research Working Paper;No. 2352 |
| description |
To address questions about how stronger patent rights will affect India's pharmaceutical industry, the author simulates the effects of introducing such protection - as required by the World trade Organization Agreement on Trade-Related Intellectual Property Rights (TRIPs) - on market structure and static consumer welfare. (India must amend its current patent regime by 2005 and establish a transitional regime in the meanwhile.) The mode the author uses accounts for the complex demand structure for pharmaceutical goods. Consumers can choose among various drugs available to treat a specific disease. And for each drug, they have a choice among various differentiated brands. The author calibrates the model for two groups of drugs - quinolonnes and synthetic hypotensives - using 1992 brad-level data. In both groups, a subset of all available drugs was patent-protected in Western Europe but no India, where Indian manufacturers freely imitated them. The simulation analysis asks how the market structure for the two groups of drugs would have looked if India had granted patents for drugs. It does not take account of the fact that stronger patent protection will not apply to existing drugs and that the Indian government might be able to restrain high drug prices by imposing price controls or granting compulsory licenses. Still, the author concludes that if future drug discoveries are mainly new varieties of already existing therapeutic treatments, the effect of stronger patent protection is likely to be small, If newly discovered drugs are medicinal breakthroughs, however, prices may rise significantly above competitive levels and static welfare losses may be large. If demand is highly price-elastic, as is likely in India, profits for transnational corporations are likely to be small, but if private health insurance is permitted in India, reducing the price-sensitivity of demand, patent-holders' profits could increase substantially. In light of the fact that the TRIPS Agreement strengthens patent rights in most developing countries, pharmaceutical companies may do more research on, for example, tropical diseases. |
| format |
Publications & Research |
| author |
Fink, Carsten |
| author_facet |
Fink, Carsten |
| author_sort |
Fink, Carsten |
| title |
How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries |
| title_short |
How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries |
| title_full |
How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries |
| title_fullStr |
How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries |
| title_full_unstemmed |
How Stronger Patent Protection in India Might Affect the Behavior of Transnational Pharmaceutical Industries |
| title_sort |
how stronger patent protection in india might affect the behavior of transnational pharmaceutical industries |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://hdl.handle.net/10986/21481 |
| _version_ |
1764448351932121088 |