SPECIAL INTEREST POLITICS AND INTELLECTUAL PROPERTY RIGHTS: AN ECONOMIC ANALYSIS OF STRENGTHENING PATENT PROTECTION IN THE PHARMACEUTICAL INDUSTRY

In: Economics & politics, Band 20, Heft 2, S. 185-215

Abstract

Since the 1980s, the pharmaceutical industry has benefited substantially from a series of policy changes that have strengthened the patent protection for brand‐name drugs as a result of the industry's political influence. This paper incorporates special interest politics into a quality‐ladder model to analyze the policy‐makers' tradeoff between the socially optimal patent length and campaign contributions. The welfare analysis suggests that the presence of a pharmaceutical lobby distorting patent protection is socially undesirable in a closed‐economy setting but may improve social welfare in a multi‐country setting, which features an additional efficiency tradeoff between monopolistic distortion and international free riding on innovations.