Patrick Gaulé & Annamaria Conti, Universities and access to medicines: what is the optimal humanitarian license?

Abstract: This paper seeks to add an economic contribution to the current debate on using university licensing contracts to improve access to medicines in developing countries. We build a simple model in which we have a university licensing an academic invention to a profit-maximizing pharmaceutical company. We compare three di¤erent types of licensing contracts that the university might use to enhance access to pharmaceuticals in the South: (1) an exclusive license limited to the North; (2) an exclusive license worldwide with a price cap in the South; and (3) an exclusive license worldwide with a price cap in the South and a clause specifying that the licensee would lose its exclusivity in the South if it does not supply the Southern market. We show that in a simple model with asymmetric information on production costs the latter type of contract dominates the two others. (January 16, 2008)