Significance
The provisions of the Trade-Related Aspects of Intellectual Property Rights treaty (TRIPs) for pharmaceutical products have become a central issue in the globalization debate since the Agreement came into force on January 1, 1995. Innovative pharmaceutical firms view the TRIPs Agreement as correcting the deficiencies of pharmaceutical intellectual property law in developing states that led to copying of products and reduced profitability. At the same time, developing nations argue that intellectual property rights protection for pharmaceutical products will entail substantial financial and institutional costs, at the expense of public health.

In a time of limited health budgets, policymakers in developing countries worry that extending intellectual property rights protection to pharmaceuticals may result in an increase in the price of pharmaceuticals.

A number of other studies have examined the link between intellectual property protection and pharmaceutical prices and concluded that substantial price increases could result, however, the question remains unresolved. This paper, supported by funding from the Pharmaceutical Researcher and Manufacturers of America, takes another look at this controversial issue.

Setting and Assumptions
Rozek and Berkowitz examine the link between movements in pharmaceutical prices and changes in intellectual property protection in nine developing countries. The study employs IMS data on pharmaceutical prices and sales for six therapeutic classes of drugs between 1985 and 1996, a period during which several countries first enacted intellectual property laws.

The paper begins with a cursory review of the status of IP protection in each of the developing countries during the 1985-1996 period. Of the nine countries in the sample, five countries had intellectual property protection in place (Korea, Mexico, Taiwan, Hungary, and Brazil), while the remaining four were without (Argentina, Egypt, Jordan, and Turkey).

Methodologically, the analysis examines price movements for three distinct samples of products to answer three particular questions:

1. a set of the same drugs across all countries to examine whether countries with IP protection in place have higher pharmaceutical prices than those who do not,
2. a sample of the existing "original" pharmaceuticals (branded products) in each of the nine countries to shed light on how the price changes of a market basket of products compared to inflation, and,
3. a sample of all products in each country, identifying those introduced before and after changes in IP protection, to examine possible price variation associated with the change.

Results
In this paper, Rozek and Berkowitz highlight results concerning the second group of products. They argue that movements in the prices of branded pharmaceutical products are largely unaffected by the institution of IP protection, attributing this to four factors: patent protection only applies to future products and does not retroactively cover existing drugs, substitutes are available within therapeutic classes, government purchasing (monopsony buyers) limits price increases, and price control regulations constrain pharmaceutical prices.

This result is hardly surprising. Since existing products are not subject to patent protection, patents are not likely to cause their prices to go up. To more directly address the fundamental concerns surrounding higher pharmaceutical prices, slightly different questions need to be answered.

And, in fact, Rozek and Berkowitz shed some light on these two questions:

1. Will increased IP protection for pharmaceuticals result in higher introductory prices for new pharmaceutical products? Without directly examining this question, Rozek and Berkowitz suggest that the answer would be ‘yes’.
2. Following the institution of IP protection, does pharmaceutical spending increase due to a change in consumption, that is, are cheaper locally-produced copies increasingly replaced by higher-priced branded products? In six of the nine countries studied, the analysis finds increased market share for branded products and reduced market share for "other" products, though the authors state that there is no evidence that consumption systematically changes with intellectual property protection.