Abstract:
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Under the bilateral trade and investment negotiations with the United States, several developing countries were required to enforce the TRIPS-Plus provisions. The dramatic expansion of these U.S. intellectual property policies through the free trade agreement negotiations has precipitated the intense debate about the merits of these requirements between the United States and its trade partners in the developing world. On one hand, most low-income countries claim that very stringent intellectual property protection for pharmaceuticals will result in considerably higher prices for medicines, with adverse consequences for the health and well-being of their citizens. On the other hand, the United States and its research-based global pharmaceutical companies argue that prices are unlikely to rise significantly as most patented medicines have therapeutic substitutes. Under the free trade agreement negotiation with the United States, Thailand has come under policy scrutiny regarding its pharmaceutical patent regime, as drug spending is a major component of the overall national health expenditure. For a technology-importing country like Thailand, while long-run (dynamic) gains from enforcing TRIPS-Plus remain poorly understood and controversial, the shift to stronger and broader intellectual property protection in regard to these provisions unquestionably incurs substantial short-run costs arising in the form of static inefficiency including: legal and administrative costs, cost of rent transfers, and incremental cost due to higher prices of patented medicines. Among these costs, the social cost due to monopolistic prices of patented medicines is the most noteworthy one; this study empirically assessed this cost with the objective to contribute to the ongoing controversy regarding the merits of TRIPS-Plus in the Third World countries. Central to the ongoing debate is the structure of demand for pharmaceuticals in poor developing economies, where access to medicines is predominantly sensitive to price for the reason that a large number of people, particularly the poor and the deprived, pay out of their own pockets due to a lack of health insurance coverage. Using a detailed product-level data set from Thailand, we estimated demand-side parameters together with key price and expenditure elasticities for the modern generation sub-segment, which consists of three main therapeutic categories, namely beta blocking agents, calcium channel blockers and agents acting on the renin-angiotensin system, of the oral antihypertensive drugs segment of the Thai pharmaceuticals market. We then used these estimates to carry out counterfactual simulations of what consumer welfare would have been, if Thailand had enforced TRIPS-Plus. Our results suggested that concerns about the potential adverse effects of TRIPS-Plus in developing economies may have some basis. More specifically, we estimated that in the modern generation sub-segment of the oral antihypertensive drugs segment alone, the enforcement of TRIPS-Plus would result in a substantial accumulated consumer welfare loss to the Thai economy, ranging between 30 billion and 206 billion, within a ten-year period from 2012 to 2021. The magnitudes and significance of consumer welfare loss we estimated have suggested that without clear inclusive evidence as regards the merits of TRIPS-Plus in every aspect, Thailand along with other technology-importing developing countries not accept any further intellectual property protection beyond the WTO TRIPS mandates.
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