Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/50577
Authors: 
Acharyya, Rajat
García-Alonso, María del Carmen
Year of Publication: 
2009
Series/Report no.: 
School of Economics discussion papers 09,19
Abstract: 
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, Parallel Imports) 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), 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.
Subjects: 
patent protection
TRIPS
innovation
imitation
parallel imports
pharmaceuticals
JEL: 
D4
L1
I1
Document Type: 
Working Paper

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