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The Dual Effects of Intellectual Property Regulations: Within- and Between-Patent Competition in the U.S. Pharmaceuticals Industry

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  • Frank R. Lichtenberg
  • Tomas J. Philipson

Abstract

A patent protects an innovator only from others who produce the same product, but it does not protect him from others who produce better products under new patents. Previous work has emphasized that intellectual property regulations stimulate research and development by protecting innovative returns from imitators of the same product, but the effects of these regulations on between-patent competition by new patents has been ignored. We attempt to estimate the relative effect of between-patent and within-patent competition on innovative returns of research-based pharmaceutical companies. We estimate that between-patent competition, most of which occurs while a drug is under patent, costs the innovator at least as much as within-patent competition, which cannot occur until a drug is off patent. The reduction in the present discounted value of the innovator’s return from between-patent competition appears to be at least as large as the reduction from competition within patents and may be much larger.

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File URL: http://www.jstor.org/stable/full/10.1086/374703
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Bibliographic Info

Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

Volume (Year): 45 (2002)
Issue (Month): S2 ()
Pages: 643-672

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Handle: RePEc:ucp:jlawec:doi:10.1086/374703

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Cited by:
  1. Alexander Heuer & Malwina Mejer & Jennifer Neuhaus, 2007. "The National Regulation of Pharmaceutical Markets and the Timing of New Drug Launches in Europe," Kiel Advanced Studies Working Papers 437, Kiel Institute for the World Economy.
  2. Hostenkamp, Gisela, 2013. "Do follow-on therapeutic substitutes induce price competition between hospital medicines? Evidence from the Danish hospital sector," Health Policy, Elsevier, vol. 111(1), pages 68-77.
  3. Francesco Laforgia & Fabio Montobbio & Luigi Orsenigo, 2007. "IPRs, technological and industrial development and growth: the case of the pharmaceutical industry," KITeS Working Papers 206, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Oct 2007.
  4. Frank R. Lichtenberg, 2002. "The Effect of Changes in Drug Utilization on Labor Supply and Per Capita Output," NBER Working Papers 9139, National Bureau of Economic Research, Inc.
  5. Arcidiacono, Peter & Ellickson, Paul B. & Landry, Peter & Ridley, David B., 2013. "Pharmaceutical followers," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 538-553.
  6. Joseph A. DiMasi & Cherie Paquette, 2005. "The Economics of Follow-On Drug Research and Development: Trends in Entry Rates and the Timing of Development - The Authors' Reply," PharmacoEconomics, Springer Healthcare | Adis, vol. 23(12), pages 1193-1202.
  7. Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2009. "Nuove politiche per l'innovazione nel settore delle scienze della vita," Working Papers 03-2009, Competitività Regole Mecati (CERM).
  8. Michael Yuan, 2006. "A better copyright system? comparing welfare of indefinitely renewable copyright versus fixed-length copyright," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(6), pages 519-542.
  9. John Cawley & John A. Rizzo, 2005. "The Competitive Effects of Drug Withdrawals," NBER Working Papers 11223, National Bureau of Economic Research, Inc.

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