Quantifying the Long-Run Economic and Health Impact of Reduced Intellectual Property Protections for New Drugs

That is the title of a new working paper written by myself, Sabiha Quddus and Suhail Thahir. The abstract is below.

Some policymakers have called for weakening of intellectual property protections for vaccines and other pharmaceutical products, with the aim to reduce the price and improve access to existing medical technologies, particularly in Eastern Europe and developing countries. While these policies may reduce cost in the short-run, their potential impact on health technology innovation is unclear. This study aims to quantify the short- and long-run social welfare impact of changes to intellectual property policies relevant to the life sciences industry. The study developed a simulation model to examine the impact of two potential policy changes to intellectual property protections: (i) shortening the effective market exclusivity duration; and (ii) waiving patents for a subset of drugs. The outcomes of interest include the number of new drugs approved per year, impact on drug prices, as well as the consumer, producer, and social welfare measured over a 30-year time horizon. We find that a 1-year reduction in effective patent length reduces the number of new drugs brought to market from 46 to 39 per year (a 16% decline), decreasing in social welfare by $9.0 trillion between 2021 and 2050. Consumers incur 75.8% ($6.8 trillion) of the reduction in social welfare.

Read the full working paper here.