The role of TRIPS in encouraging pharmaceutical technological diffusion in developing countries
By Iain Cockburn, Tim Wilsdon, Michele Pistollato, Rajini Jayasuriya, and Thomas Watson
The 1995 TRIPS Agreement between member states of the World Trade Organization (WTO) defines minimum standards of intellectual property (IP) protection and enforcement. One of the explicit goals of the TRIPS Agreement has been promotion of technological innovation and transfer and dissemination of technologies worldwide. Several studies have examined the impact of TRIPS on technology diffusion. Lesser (2001) found that increased protection of non-resident patent applications is correlated with an increase in inward FDI and imports, and Delgado, Kyle and McGahan (2013) found that the adoption of TRIPS provisions in developing countries increased the export of high IP products, suggesting significant economic benefits to countries that have strengthened IP protection. But relatively little research has focused on the impact of the TRIPS Agreement on technology diffusion specifically in pharmaceuticals and life sciences, perhaps the most controversial and widely discussed industrial domain in which TRIPS provisions have been applied. In this paper, we investigate the effect of TRIPS on the dissemination of pharmaceutical technological innovation, focusing on emerging markets and lower-income countries which have had limited access to innovative new drugs (Cockburn, Lanjouw, and Schankerman, 2016), and relatively little participation historically in global life sciences research.
To statistically assess the relative impact of TRIPS on technology diffusion, we developed a longitudinal panel dataset that covers a wide range of developing countries and a relatively long time period, from the signing of the TRIPS agreement in 1995 through to 2017. In particular, we focus our examination of pharmaceutical technology diffusion on three indicators of knowledge production and transfer: scientific publications as an indicator of basic research; pharmaceutical patent applications by domestic inventors; local activity in clinical trials; and knowledge sharing through licensing.
Controlling for a variety of potential confounding factors, we find that the pharma-specific provisions in TRIPS have a positive and statistically significant association with these measures of technology diffusion: adoption of TRIPS provisions is associated with a 67% increase in basic research in life sciences; a 30% increase in commercial research; 18% greater participation in drug development; and a 53% increase in knowledge transfer through licensing. These findings suggest significant economic benefits to countries that provide stronger protection of IP for pharmaceuticals, through increased domestic investment in the pharmaceutical sector, and more rapid and extensive technology diffusion.
Cockburn, I. M., Lanjouw, J. O., & Schankerman, M. (2016). Patents and the global diffusion of new drugs. American Economic Review, 106(1), 136-64.
Delgado, M., Kyle, M., & McGahan, A. M. (2013). Intellectual property protection and the geography of trade. The Journal of Industrial Economics, 61(3), 733-762.
Lesser, W. (2001). The effects of TRIPS-mandated intellectual property rights on economic activities in developing countries. World Intellectual Property (WIPO) Studies, 1, 1-24.