Narrow Results

Health and economics have a symbiotic relationship. Although this is often examined at the individual level, it is less often examined at the more macro-level. Yet, the health sector itself is a major economic sector, in terms of employment for instance. It is linked to other sectors of the economy, in terms of the consumption of intermediate goods and services, and is integrated within the global market for goods, services and people that are subject to considerable international trade. This chapter considers these wider links, exploring the evidence for economic interactions between health and the wider macroeconomy, and considers the issues of trade and health in some detail. The chapter also introduces some macro-economic approaches that have been used in health, such as Computable General Equilibrium (CGE) modeling, before presenting some specific examples and results. Capturing the macroeconomic implications of health policies on other sectors and the wider economy is essential if health policies are to be considered and weighed against non-health policies. Macroeconomic modeling provides an even playing field for policy assessments and a medium through which health and non-health policy implications can be jointly assessed using the same framework.

This paper develops a North-South model to evaluate the South’s incentive for patent protection when a Northern firm’s investment in quality-enhancing research and development (R&D) is affected by its patent policy. The model is used to (a) evaluate the impact of requiring the South to fulfill its key WTO obligation of instituting patent protection and (b) to address the role of two major flexibilities that WTO members enjoy with respect to their patent policies: the freedom to implement exhaustion policies of their choosing and the right to use compulsory licensing (CL) subject to certain stipulations. Two forces drive the model: how much the firm invests in R&D and whether or not selling in the South maximizes its global profit. CL improves consumer access in the South and can even raise innovation and global welfare. Provided the South implements patent protection, innovation and welfare are higher if the North follows national as opposed to international exhaustion. However, the South’s incentive for patent protection is not necessarily stronger under national exhaustion. Not only is CL more likely to be used under international exhaustion, the welfare gain resulting from its application is also higher relative to that under national exhaustion.