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Parallel imports, drug innovation and international patent protection: a policy game

Garcia-Alonso, Maria D C, Acharyya, Rajat (2011) Parallel imports, drug innovation and international patent protection: a policy game. Journal of International Trade and Economic Development, 21 (6). pp. 865-894. ISSN 1469-9559. (doi:10.1080/09638199.2010.541273) (KAR id:40538)


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 prfect 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: Article
DOI/Identification number: 10.1080/09638199.2010.541273
Additional information: number of additional authors: 1;
Uncontrolled keywords: income inequality, intellectual property rights, India, TRIPS, parallel imports, pharmaceuticalsJEL Classifications: D4, L1, I1
Subjects: H Social Sciences
H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Maria Garcia-Alonso
Date Deposited: 07 Mar 2014 00:05 UTC
Last Modified: 16 Nov 2021 10:15 UTC
Resource URI: (The current URI for this page, for reference purposes)

University of Kent Author Information

Garcia-Alonso, Maria D C.

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