The Political Economy of Pharmaceutical Intellectual Property Rights: Balancing Innovation and Access

The trade-off between innovation and access is a critical problem in pharmaceutical innovation policy. Without adequate intellectual property protection, knowledge is insufficiently appropriable and the output of innovation is sub-optimal. Patents and sui generis forms of intellectual property are policies utilized by the state to foster innovation, creating temporary monopolies for firms to reward their investments in research and development. This paper explores the topic of pharmaceutical innovation policy by discovering the key legal developments that influence the creation of internationally protected and harmonized minimum standards of IP rights. Equipped with a theoretical understanding of IP as a social contract and knowledge about incentives that the law provides, the status quo system of rewarding pharmaceutical innovation is observed though an analysis of the market for new chemical entities, developing an understanding of the relationship between incentives for innovation and market outcomes. Utilizing an extensive analysis of literature, promising policy options are explored for realigning incentives to better optimize the incremental benefits of pharmaceutical innovation while improving access, including public funding of clinical trials, incorporating value-for-money stipulations into reimbursement and marketing approval decisions, and creating prize-based rewards that delink the market for innovations from the market for pharmaceutical products.