The Effect of Pharmaceutical Patent Term Length on Research and Development and Drug Expenditures in Canada

Authors: 
Paul Grootendorst, Livio Di Matteo
Research Summary: 

Purpose of Study
The purpose of this study was to estimate the effects of longer patent terms on pharmaceutical firm research and development (R&D) spending and spending on drugs.

Research Approach/Method
The authors used differences in pharmaceutical firm R&D spending, spending on drugs, and drug prices over time and between different industries and countries.

Key Overarching Message
Results suggest that federal government policies that enhanced patent protection, introduced between 1987 and 1993, have been beneficial to Canada in cost-benefit terms. Specifically, R&D spending increased by a greater extent than drug costs. Increases in patented drug spending over the period of analysis have been mitigated by price controls and the retrenchment of public prescription drug subsidy programs.

Key Findings
The authors estimate that the patent changes introduced by the Federal Government increased spending on R&D by $4 billion ($1997) over the period 1988-2002. The authors also estimate an upper bound of $4 billion ($1997) in increased spending on drugs induced by the patent changes for 1996-2002. Increases in patented drug spending over the period of analysis have also been mitigated by price controls and the retrenchment of public prescription drug subsidy programs.