Pharmaceutical Investments Before and After TRIPS

Margaret Kyle, and Anita M. McGahan


The TRIPS Agreement, which specifies minimum levels of intellectual property protection for countries in the World Trade Organization, has increased levels of patent protection around the world. Using variation across countries in the timing of patent laws and the severity of disease, we test the hypothesis that increased patent protection results in greater drug development effort. We find that patent protection in wealthy countries is associated with increases in research and development (R&D) effort. However, the introduction of patents in developing countries has not been followed by greater R&D investment in the diseases that are most prevalent there.

JEL codes

  • F13: Trade Policy • International Trade Organizations
  • I18: Government Policy • Regulation • Public Health
  • L65: Chemicals • Rubber • Drugs • Biotechnology
  • O32: Management of Technological Innovation and R&D
  • O34: Intellectual Property and Intellectual Capital

Published in

The Review of Economics and Statistics, vol. 94, n. 4, November 2012, pp. 1157–1172