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Patent term extensions and commercialization lags in the pharmaceutical industry: A growth-theoretic analysis

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  • Hu, Mei-Ying
  • Lu, You-Xun
  • Lai, Ching-Chong

Abstract

Due to the lags in commercialization, the effective life of a patent is generally less than its statutory term. We introduce commercialization lags into the Schumpeterian growth model and explore the effects of patent term extensions on pharmaceutical R&D and social welfare. Our results show that extending patent terms stimulates the consumption of homogeneous goods but generates an ambiguous effect on the consumption of pharmaceuticals. When patent extensions have an inverted-U effect on social welfare, the optimal patent extension increases with the length of commercialization lags but decreases with the input intensity of commercialization lags. Finally, we calibrate the model and find that increasing patent breadth reduces the optimal patent extension.

Suggested Citation

  • Hu, Mei-Ying & Lu, You-Xun & Lai, Ching-Chong, 2022. "Patent term extensions and commercialization lags in the pharmaceutical industry: A growth-theoretic analysis," MPRA Paper 113923, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:113923
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    More about this item

    Keywords

    commercialization lags; patent term extensions; pharmaceutical R&D; economic growth; social welfare;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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