Intellectual property rights (IPR) may have immense implications for the pharmaceutical trade. Proponents argue that elevated and harmonized global IPR standards will expand medical drug access by stimulating trade, thereby improving quality of life and driving economic growth through labor productivity. Skeptics fear that monopoly prices will reduce trade and welfare. Previous studies examine pharmaceutical and high-tech trade with aggregate IPR measures or year dummy variables that provide limited insight on the specific relationship between patent policy and pharmaceutical trade (Boring, 2015; Chen, 2017).
To evaluate the effects of TRIPs Agreement on pharmaceutical exports, I consider a pharmaceutical industry-specific IPR index recently constructed by Liua and Croix, 2015. Using regression analysis, I test the impact of pharmaceutical-specific IPR protection on pharmaceutical exports values. For export values, I use bilateral trade data from UN Comtrade. As exporting countries, I focus on a select group of countries from which almost innovative pharmaceutical products originate. This study analyzes six of the seven top exporters, which account for 56% of total global drug exports. Empirical evidence indicates that IPR exerts a positive and significant effect on pharmaceutical export values. Increasing the level of pharmaceutical-specific IPR by one unit, a plausible change in the data, causes a 20% increase in export values proportionally. Findings suggest that IPR policy is a robust channel for stimulating trade and expanding access to pharmaceutical drugs.