Presented by Rong Dai,
PhD candidate in Development Economics
co-authored with Jayashree Watal (WTO)

Abstract

This paper studies the availability and affordability of new and innovative pharmaceuticals in a post-TRIPS era. The WTO’s TRIPS Agreement (TRIPS) makes it obligatory for WTO members (except LDCs) to provide pharmaceutical product patents with a 20-year protection term by 2005. We distinguish between innovative pharmaceuticals and non-innovative ones based on Lanthier et al. (2013). Pharmaceutical data is provided from IQVIA for 578 new molecular entities (NMEs) in up to 70 markets. Using Cox model with launch data from 1980 onwards, we investigate the effect of the availability of product patents on the launch likelihood of innovative pharmaceuticals. We find that patent protection has a positive effect on launch likelihood, especially for innovative pharmaceuticals, but this effect is limited in low-income markets. Besides, innovative pharmaceuticals are launched sooner than non-innovative ones irrespective of patents regime in the local market. We also study the differential pricing of pharmaceuticals and differentiate between the pricing strategies of originator versus generic companies. Competition in each molecule market is taken into account in the price study. Using price panel data from 2007 to 2017, we find evidence of differential pricing for both originator and generic products. Overall, originators differentiate by about 11 percent and generics by about 26 percent. Differential pricing is larger for pharmaceuticals to treat infectious diseases, particularly for HIV/AIDs medicines, than for non-communicable diseases. However, pharmaceutical prices are far from being fully adjusted to local income levels in either case.

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