Patent term extensions and commercialization lags in the pharmaceutical industry: A growth-theoretic analysis |
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| Institution: | 1. Department of Industrial Economics Strategy Research, Taishin Sercurities Investment Advisory, Taiwan;2. School of Business, Nanjing University of Information Science and Technology, China;3. Yangtze River Institute of International Digital Trade Innovation and Development, Nanjing University of Information Science and Technology, China;4. Institute of Economics, Academia Sinica, Taiwan;5. Department of Economics, National Cheng Chi University, Taiwan;6. Institute of Economics, National Sun Yat-Sen University, Taiwan;7. Department of Economics, National Taipei University, Taiwan;1. De Nederlandsche Bank, the Netherlands;2. Vrije Universiteit Amsterdam, School of Business and Economics, De Boelelaan 1105, 1081HV, the Netherlands;3. Network for Studies on Pensions, Aging and Retirement, the Netherlands;4. Universiteit van Amsterdam, the Netherlands |
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| 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. |
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