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Impact of Patents on Access to HIV/AIDS Drugs in Developing Countries

CID Faculty Working Paper No. 92

Joan-Ramon Borrell and Jayashree Watal
May 2002

Abstract

This paper uses sales data on HIV/AIDS drugs in a sample of 34 low and middle income countries between 1995 and 1999 to assess empirically the impact of patents on unsubsidized access to a new drug therapy. There can be two possible effects of patents on access to new drugs in developing countries. On the one hand, patents may constrain access to new drugs through less competition and higher prices. On the other hand, patents may promote access to new therapy by encouraging innovators to launch new drugs in low and middle-income countries soon after introducing them in high-income countries. The net effect is theoretically ambiguous and, therefore, it is an empirical matter to evaluate. Our main finding is that patent rights do have a negative effect on unsubsidized access to HIV/AIDS drugs. Between 1995 and 1999, switching all HIV/AIDS drugs from a patent regime to a no patent regime would have actually increased access to therapy at least by 30%. However, we also find that the negative impact of patents on access differs strongly over time, and across countries with different income levels. Patents hurt access most in the early period from the date the drug is launched in the US, and in the countries of our sample with the relatively higher per capita income levels.

Keywords: patents, entry, pricing, access, pharmaceuticals

JEL subject codes: L65, K11, O34