Compulsory licensing and access to drugs

Abstract

This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link AbstractCompulsory licensing allows the use of a patented invention without the owner's consent, with the aim of improving access to essential drugs. The pharmaceutical sector argues that, if broadly used, it can be detrimental for innovation. We model the interaction between a company in the North, that holds the patent for a certain drug, and a government in the South that needs to purchase it. We show that both access to drugs as well as pharmaceutical innovation depend largely on the Southern country's ability to manufacture a generic version. If the manufacturing cost is too high, compulsory licensing is not exercised. As the cost decreases, it becomes a credible threat forcing prices down, but reducing both access and innovation. When the cost is low enough, the South produces its own generic version, and access reaches its highest value, despite a reduction in innovation. The global welfare analysis shows that the overall impact of compulsory licensing can be positive, even when accounting for its impact on innovation. We also consider the interaction between compulsory licensing and the strength of IPRs, which can have global repercussions in other markets beyond the South.

Antitrust and Compulsory Licensing in BRICS and Developing Countries

“…having a drug available cheaply at a BRICS or other developing country being shipped to a higher-priced market, usually a developed country-as this has the potential of undermining the incentives for innovation. Stavropoulou and Valletti (2015) assume the drugs produced under compulsory licensing could be re-imported and therefore the "paragraph 6 system" supposedly undermines the labs' capacity to price differentiate across markets. Our understanding is that the system allows a more developed country to issue a compulsory license exclusively to export (to a developing or least-developed country), keeping its domestic prices for that drug unaffected.…”

Innovative Approaches to Increase Access to Medicines in Developing Countries

“…In addition, some firms believe that compulsory licensing diminishes their incentives for innovation ( 11 ). Nonetheless, the overall impact of compulsory licensing seems beneficial ( 27 ). The TRIPS Agreement created an environment legitimizing innovators and generic companies, stimulating cross-border alliances, increasing numbers of R&D alliances, patent filings, and R&D investment.…”

Competition Law Enforcement in the BRICS and in Developing Countries

“…Stavropoulou and Valletti (2015) assume the drugs produced under compulsory licensing could be re-imported and therefore the "paragraph 6 system" supposedly undermines the labs' capacity to price differentiate across markets. having a drug available cheaply at a BRICS or other developing country being shipped to a higher-priced market, usually a developed country-as this has the potential of undermining the incentives for innovation.…”