Regulation and Welfare: Evidence from Paragraph IV Generic Entry in the Pharmaceutical Industry

With increasing frequency, generic drug manufacturers in the United States are able to challenge the monopoly status of patent-protected drugs even before their patents expire. The legal foundation for these challenges is found in Paragraph IV of the Hatch-Waxman Act. If successful, these Paragraph IV challenges generally lead to large market share losses for incumbents and sharp declines in average market prices. This paper estimates, for the first time, the welfare effects of accelerated generic entry via these challenges. Using aggregate brand level sales data between 1997 and 2008 for hypertension drugs in the U.S. we estimate demand using a nested logit model in order to back out cumulated consumer surplus, which we find to be approximately $270 billion. We then undertake a counterfactual analysis, removing the stream of Paragraph IV facilitated generic products, finding a corresponding cumulated consumer surplus of$177 billion. This implies that gains flowing to consumers as a result of this regulatory mechanism amount to around $92 billion or about$133 per consumer in this market. These gains come at the expense to producers who lose, approximately, $14 billion. This suggests that net short-term social gains stands at around$78 billion. We also demonstrate significant cross-molecular substitution within the market and discuss the possible appropriation of consumer rents by the insurance industry. Policy and innovation implications are also discussed.

Intellectual Property Regimes and Firm Structure

We use The Patents (Amendment) Act, 2002 in India as a quasi-natural experiment to identify the causal e¤ect of higher incentives for innovation on firm organizational features. We find that stronger intellectual property (IP) protection has a sharper impact on technologically advanced firms, i.e., firms that were a-priori above the industry median in terms of technology adoption. While there is an overall increase in managers' share of compensation, this increase is about 1.6-1.7% more for high-tech firms. This difference can be attributed to a larger increase in performance pay for high-tech firms. The reform also leads to a significant increase in number of managerial layers and number of divisions for high-tech firms relative to low-tech firms, but only the latter effect is correlated with the differential change in managerial compensation. Broadly, we demonstrate that stronger IP protection leads to an increase in both within-firm and between-firm wage inequality, with more robust evidence for between-firm inequality

Innovation and internationalisation in the Indian software industry: Wipro – Going forward

This interview documents how the Indian software industry is trying to transform itself in the growing need to remain competitive through innovation and internationalisation. In a free-wheeling conversation, Wipro Chief Strategy Officer Mr. Rishad Premji discusses macro and micro issues in this transformational path outlining efforts on the part of Wipro to acquire strategic agility and remain competitive globally with an ever changing external environment

Fundamental Patent Reform and the Private Returns to R&D - The Case of Indian Pharmaceuticals

How do private returns to inventive activity change when IPR regimes are substantially strengthened? Our paper investigates this question by looking at the impact of patent reforms in India on India-based pharmaceutical companies. In a fundamental policy shift, India agreed to introduce product patents for pharmaceuticals when it signed the WTO TRIPS treaty in 1995. This policy came into effect through an enabling legislation in 2000 and a final implementation in 2005. The dataset is a panel of 315 pharmaceutical firms from 1990 to 2005. Private returns of a firm are measured using a hedonic stock market valuation of the tangible total assets (A) and intangible inventive assets (K). The intangible assets are measured by stocks of R & D expenditure at various literature specified depreciation rates. We normalize our intangibles with total assets, while using controls like firm sales and aggregate industry dummies in our estimations. Our analysis covers stratified industry subsets and watershed periods to capture effects of regime changes. The method of estimation involves pooled OLS regressions with time dummies and fixed effects to account for firm-specific unobserved heterogeneity. We also use non-linear least squares with first differences as a robustness check for our results. The findings reveal a monotonic increase in private returns to inventive activity, with returns peaking around 2005, the year in which product patents were introduced in India. An increase in depreciation rates of R & D implying higher obsolescence of R & D activities results in increasing returns to R & D for various subsets of the industry. This provides early evidence of the markets positively valuing more recent R & D activities as firms shift their research capabilities with changes in the patent regime. The coefficient estimates of K/As, our primary independent variable, conform to previous results from studies on market value of innovation in various economies and industries

New Suppliers & New Markets - Essays on the Global Pharmaceutical Industry - Working Draft of Proposal

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Ethical issues in health care sector in India

AbstractThe issue of ethics and economic efficiency in the provisioning and delivery of services becomes complex in the Indian context where health indicators are poor. In an attempt to explore this issue, this round table article first provides an overview of the field of ethics in health care, the health care sector in India and its facilities, the key institutional actors and finally, the key ethical issues concerning the different players in health care – the physician, the bio-pharmaceutical industry, and the chemist. In its second part, the article reports on a discussion of the issues with a panel of experts across geographic and organisational settings