Measurement, innovation, and strategies in the global pharmaceutical industry

This dissertation has three chapters. In Chapter One, I develops and calculates a new measure of property rights in pharmaceutical innovations, the Pharmaceutical Intellectual Property Protection (PIPP) Index. The PIPP Index is calculated annually from 1960 to 2005 for 154 countries. We find that the PIPP Index varies systematically over time and across countries. Most countries did not establish property rights in pharmaceutical innovations until they had become high-income countries or were pressured to do so. The 1995 TRIPS Agreement dramatically increased the extent of intellectual property protection for pharmaceutical products for countries at all levels of development but there remains considerable variation across countries and within groups of countries with respect to the type of pharmaceutical innovations eligible for protection as intellectual property.;In Chapter Two, an instrumental variable econometric model is used to investigate how changes in patent protection for pharmaceutical innovations are related to patent awards from the United States Patent and Trademark Office to nonresident applicants. We use a new measure of patent protection for pharmaceutical innovations to account for cross-country variation in pharmaceutical protection. The GMM method and other IV estimators are used to estimate econometric results. We find that stronger pharmaceutical patent protection in the applicant's home country does not increase the number of U.S. pharmaceutical patents granted to applicants from both developing and developed countries.;In Chapter Three, I use a game-theoretic model to investigate the strategies that brand-name and generic firms use to maximize profits in the U.S. Market within the provision of the Hatch-Waxman Act Paragraph IV procedures. Three possible Nash equilibriums are identified with the symmetric information: (1) the generic firm does not challenge the patent; (2) The brand-name firm accommodates the generic's entrance; and (3) the two parties settle the challenge with a payment from the brand-name firm to the generic firm and an agreement from the generic firm not to enter or to delay entering the market. The model shows that once litigation begins, the brand-name firm and generic firm always have incentives to reach a settlement instead of waiting for the court's decision.