Do Patents Matter?: Empirical Evidence after GATT

Since the late 1980s the global intellectual property rights (IPR) system has been strengthening dramatically as much of the developing world introduces patent protection for new drug products. This may lead to more research on drugs to address developing country needs. As there are identifiable differences in the drug demands of these countries as compared to those already offering such protection the situation offers a unique opportunity to examine the incentive role of patent protection. We use new survey data from India, the results of interviews with industry, government and multinational institutions, and measures of R&D activity constructed from a variety of statistical sources to determine trends in the allocation of research to products specific to developing country markets. There is some, although limited, evidence of an increase in the mid- to late 1980s which appears to have leveled off in the 1990s. In interpreting the trends we examine factors that might enhance, or dampen, a firm's responsiveness to the availability of product patents. The picture presented here provides a baseline' against which future research activity can be compared once the new global patent regime is fully established and uncertainty about its implementation is resolved.