Health and economic implications of patent protection for pharmaceuticals : a case study of Thailand

Thai patent law was amended to comply with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement in 1992, eight years before the effective date required. Some 15 years later, during 2006-2008, Thailand issued compulsory licenses (CL) for seven medicines. Although this was allowed under TRIPS flexibilities, it has generated debate, both within Thailand and internationally, concerning whether, on balance, Thailand has benefitted from the restricted patent legislation resulting from TRIPS, or the unrestricting of it through CL. The debate arises because those concerned principally with health consider patents to lead to reduced access to essential medicines, and hence reduced health, whereas those principally concerned with trade see patents as the means to secure development and availability of new medicines and foreign investment. This thesis aims to understand better the implications of strengthening or weakening patent protection through systematically examining the relationships between price, access to current medicines, access to future medicines (through market entry of new medicines) and foreign investment in a more holistic fashion, both within the pharmaceutical industry specifically and the economy more generally. To address this overall aim, four objectives were set. The first was to assess the impact of patents on pharmaceutical prices. The debate hinges on the relationship between price and patents, and hence it is imperative to first establish this relationship in Thailand. Ordinary least squares regression was employed to estimate the impact of patent upon price, while controlling for market and medicine factors. The findings show that patents are associated with a price increase of approximately 200%.Second, as price is argued to be the main restriction on access to medicines, it is important to assess the role of price in determining access to medicines. A probit model indicated that price is not a significant determinant of a medicine being listed on the National List of Essential Medicines (NLEM); however, price impedes access to non-NLEM medicines significantly. Third, patent legislation will also affect the process for the launch of new medicines within a country. A Cox proportional hazard model was used to analyze the launch experience of new medicines to Thailand during 1982-2009.The empirical results show that policy related to patent law has a significant and positive impact on the rapidity of the launch of new products in Thailand. Most importantly, CL is shown to have a significant and adverse effect on the speed of new medicine launches in Thailand. The last objective is to examine the impact of stronger patent protection on foreign investment, both in the pharmaceutical industry specifically, and the wider economy more generally. The empirical estimation suggests that there is no significant change in foreign direct investment (FDI) inflows after the patent law amendment in 1992 and that weakening pharmaceutical patent protection using CL does not necessarily keep away foreign investors. In conclusion, from this thesis there is little evidence of benefit from patent law change. Therefore, stronger patent protection should not be accepted. The evidence from this thesis highlights that the critical issue in determining whether the Thai population has gained from stringent patent protection or not is the tension between current and future access. Patents increase the price of medicines and impede current access. However, patients benefit from greater access to new medicines. These findings suggest that the price of patented medicines should be monitored closely to avoid undesirable effect on access, together with work on a system to more effectively stimulate local R&D activity