WIPO Seminar Discusses Impact Of TRIPS On Pharmaceutical Innovation

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The latest instalment of the World Intellectual Property Organization seminar series titled “The Economics of Intellectual Property” covered the issue of product patents in the pharmaceutical industry. Discussion focussed on the economics of intellectual property rights and how pharmaceutical patent protection might not be the sole culprit in the access to innovation problem.

Margaret Kyle, a professor at the Toulouse School of Economics and the Université de Toulouse I in France, presented preliminary findings from her study on the topic of “Intellectual Property Rights, Price, and Access to Innovation: Evidence from the Agreement on Trade Related Aspect of Intellectual Property Rights (TRIPS).” The WIPO seminar took place on 18 June.

The study specifically looked at the impact of World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) on the speed of launch, price, and volume of sales of drugs across countries and across different drug products.

In her study, Kyle analysed the trade-off between the dynamic and static effects of intellectual property rights (IPRs). The dynamic effect of IPRs is considered an incentive for innovation, under the notion that patent protection incentivises companies, through granting market exclusivity, to invest in the research and development (R&D) to produce new medical products. The static cost of IPRs in the short term is that granting market exclusivity often leads to companies pricing their products at levels unaffordable by many patients, especially in lower-income countries.

The results of the study suggested that pharmaceutical product patents “are associated with faster launch and higher prices” and “compliance with TRIPS is associated with a decrease in the price premium associated with patent protection, while other measures of access have increased.”

In the paper, Kyle says that taking into account other policy instruments such as price controls and compulsory licensing offers a possible explanation on how the effect of TRIPS on access may not be as negative as initially feared. Kyle was also sure to clarify that the results of the study do not indicate that patents lead to lower prices, but rather that the premium at which patents increase the price of drugs might not be as high as formerly believed.

Kyle explained that the results implied IPRs are neither necessary nor sufficient to launch new pharmaceutical products. That is to say that the existence of a product patent does not always inhibit generic imitation, nor does the lack of such a patent necessarily deter an originator from making a product available in a given market.

During the presentation, Kyle addressed other factors related to pharmaceutical access including differential pricing, price controls, as well as alternative R&D incentive models like patent pools and prizes. Kyle said that there are certain circumstances under which prizes might be a better model, such as in developing drugs for neglected diseases that primarily affect lower-income countries.

Despite an observed overall increase in access to new pharmaceuticals with TRIPS, Kyle states that the effect of IPRs specifically is somewhat less clear, due to the potential for countervailing policies to distort the effect of IPRs.

Kyle also notes that the differences between countries’ pharmaceutical sectors, development status, and political climate could have implications for the impact of IPR enforcement.

Kyle commented that the debate on the issue of IPRs and access if often quite polarised, but in practice things are not as “clear-cut” in determining the optimal level and extent of patent protection and IPRs.

Brittany Ngo is currently completing her Master’s in Health Policy and Global Health at the Yale School of Public Health and previously obtained a Bachelor’s of Arts in Economics from Georgetown University. Through her studies she has developed an interest in health-related intellectual property issues. She is a summer intern at Intellectual Property Watch.

Brittany Ngo may be reached at info@ip-watch.ch.

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