Investments in Pharmaceuticals Before and After TRIPS

The TRIPS Agreement, which specifies minimum levels of intellectual property protection for countries in the WTO, has increased levels of patent protection around the world. Using variation across countries in the timing of patent laws and the severity of disease, we test the hypothesis that increased patent protection results in greater drug development effort. We find that patent protection in wealthy countries is associated with increases in R&D effort. However, the introduction of patents in developing countries has not been followed by greater R&D investment in the diseases that are most prevalent there.