A Note on Global Welfare in Pharmaceutical Patenting

F. M. Scherer

The World Economy, 2004, vol. 27, issue 7, 1127-1142

Abstract: This paper revisits the question of whether global welfare is higher under a uniform world‐wide system of pharmaceutical product patents or with international rules allowing low‐income nations to free‐ride on the discoveries of firms in rich nations. Key variables include the extent to which free‐riding reduces the discovery of new drugs, the rent potential of rich as compared to poor nations, the ratio of the marginal utility of income in poor as compared to rich nations, and the competitive environment within which R&D decisions are made. Global welfare is found to be higher with free‐riding across plausible discovery impairment and income utility combinations, especially when rent‐seeking behaviour leads to an expansion of R&D outlays exhausting appropriable rents.

Date: 2004
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