2021/37 | LEM Working Paper Series | ||||||||||||||||
Do patents really foster innovation in the pharmaceutical sector? Results from an evolutionary, agent-based model |
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Giovanni Dosi, Elisa Palagi, Andrea Roventini and Emanuele Russo |
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Keywords | |||||||||||||||||
Innovation; Intellectual property rights; Market power; Pharmaceutical sector; Agent-based models.
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JEL Classifications | |||||||||||||||||
L10, L65, O30, O34, C63
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Abstract | |||||||||||||||||
The role of the patent system in the pharmaceutical sector is highly debated also due
to its strong public health implications. In this paper we develop an evolutionary,
agent-based model of the pharmaceutical industry to explore the impact of different
configurations of the patent system upon innovation and competition. The model is
able to replicate the main stylized facts of the drug industry as emergent properties. We
perform policy experiments to assess the impact of different IPR regimes changing the
breadth and length of patents. Results suggest that enlarging the extent and duration
of patents yields adverse effects in terms of innovation outcomes, as well as of market
competition and consumer welfare. Such general conclusions hold even if one takes
into account the possible positive effects on R&D intensity and information disclosure
triggered by patents.
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