Patent implications in the pharmaceutical industry: Are static high prices leading to dynamic innovations?

Abstract

Agreement on Trade Related aspects of Intellectual Property Rights (TRIPS) was laid on the premises of rewarding monopolistic patent rights to the innovator. Stronger patent protection was advocated to promote technology transfer from developed nations to the rest of the world. To boost domestic innovative potential and to maintain trade ties, most developing countries signed the TRIPS agreement. Impact of patent laws in the pharmaceutical industry was crucial as it posed threat to access health. This paper aims to analyze the impact of pharmaceutical product patent laws incorporated under the TRIPS agreement using 65 countries panel dataset from 1995 to 2016. The data is empirically analyzed using negative binomial regression and Poisson regression. Results clearly indicate that the number of pharmaceutical patents filed in US Patent and Trademark Office (USPTO) has decreased after TRIPS compliance in both low and middle income countries. However, the decline is larger in upper middle and lower middle income countries than in low income countries. The phenomenon of low patent activity has an increasingly declining trend across low and middle income countries. Hence the claimed hypothesis that stronger patent rights would increase innovative potential does not seem to stand true, which raises serious affordability concerns of bringing patents in the pharmaceutical sector.