The Effects of Trade Agreements on Imports of Biologics: Evidence from Chile

Intellectual property rights (IPR) provisions have become a staple of modern free trade agreements since the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which set minimum standards for IPR protection for World Trade Organization (WTO) members. Many recent bilateral and multilateral trade agreements increase the scope and coverage of IPR provisions and have come to be known as TRIPS-Plus. To inform the debate over trade agreements and access to medicines, there is now considerable literature examining the impact of such TRIPS-Plus provisions.

A working paper by Danielle Trachtenberg, Warren Kaplan, Veronika Wirtz and Kevin P. Gallagher builds on the literature using a gravity model to estimate the impact of the strength of IPR provisions in Chile’s free trade agreements (FTAs) on medicines. The authors look at the resulting value, volume and price of imported biologic medicines.

The paper finds that FTAs with stronger IPR provisions raise prices of imported biologics into Chile. However, the data also shows that the imported volume of biologics increases with TRIPS-Plus provisions. This indicates that both market expansion and market power effects are present. The paper contributes to the literature by developing new indicators of treaty IPR strength, focussing on one group of pharmaceuticals that is highly affected by IPR provisions and using the gravity model to estimate the impacts on the value, volume and unit value of imports.