Reducing patent length will reduce drug prices. The reduction is term is compensated by increase in scope.
Sexell et al 20 [Tanja; she is a Senior Researcher at VATT and a Faculty Member of Helsinki Graduate School of Economics. She has a doctorate in Economics from the University of Helsinki; Tuomas Takalo; He works as a Senior Advisor at the Monetary Policy and Research Department at the Bank of Finland. His research focuses on innovation and financial economics. Mr. Takalo received his doctorate in Economics from the University of Helsinki; Olena Izhak; She is a former post-doctoral researcher at Düsseldorf Institute for Competition Economics (currently on leave) working as a data scientist at Fractal Analytics. She holds a doctorate degree in Economics from the University of Helsinki; 8/25/2020; CERPR; “Optimal patent policy for pharmaceuticals: Balancing innovation and access to new drugs”; https://cepr.org/voxeu/columns/optimal-patent-policy-pharmaceuticals-balancing-innovation-and-access-new-drugs]//kaviWaRu
We predict the effects of changes in patent term and scope on innovation and welfare, using the estimated elasticities from the DiD and IV regressions as inputs into our theoretical formulas. Consistent with the theoretical results in Gallini (1992), we find that longer-lived patents increase costly patent challenges, and are inefficient for promoting new drug development. Shorter patent terms would reduce costly patent challenges, while broader patents would restore incentives to develop new drugs. Also, shorter-lived patents would expire earlier, thereby ensuring swifter access to generics. To restore the incentives to innovate the shortened patent term should be compensated by broadening the scope of new drug patent protection, for example, by awarding product patents instead of method patents, awarding longer market and data exclusivity periods for broader categories of new drugs, and restricting provisions for compulsory licensing.