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The effect of Paragraph IV decisions and generic entry before patent expiration on brand pharmaceutical firms

  • Panattoni, Laura E.
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    Abstract This purpose of this paper is to investigate the impact of Paragraph IV patent infringement decisions on brand drug pharmaceutical firms. Paragraph IV decisions determine whether a generic firm can enter before the period of exclusivity ends. I construct a novel dataset of all Paragraph IV decisions and find that they disproportionately involve the highest revenue drugs, significant periods of patent protection, and a non-trivial portion of all brand drugs facing generic entry. I also estimate the impact of Paragraph IV decisions on brand firm profitability and find they have large value consequences.

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    File URL: http://www.sciencedirect.com/science/article/B6V8K-51696RF-1/2/1e168b2d91a97b49718c311fd4521a61
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    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 30 (2011)
    Issue (Month): 1 (January)
    Pages: 126-145

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    Handle: RePEc:eee:jhecon:v:30:y:2011:i:1:p:126-145
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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    1. Henry Grabowski, 2003. "Patents and New Product Development in the Pharmaceutical and Biotechnology Industries," Levine's Working Paper Archive 618897000000000661, David K. Levine.
    2. Tracy L. Regan, 2007. "Generic entry, price competition, and market segmentation in the prescription drug market," Working Papers 2010-7, University of Miami, Department of Economics.
    3. Grabowski, Henry, 2002. "Patents and New Product Development in the Pharmaceutical and Biotechnology Industries," Working Papers 02-25, Duke University, Department of Economics.
    4. Bulow, Jeremy I., 2003. "The Gaming of Pharmaceutical Patents," Research Papers 1804, Stanford University, Graduate School of Business.
    5. Bhattacharya, Jayanta & Vogt, William B, 2003. "A Simple Model of Pharmaceutical Price Dynamics," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 599-626, October.
    6. Schmalensee, Richard., 1980. "Product differentiation advantages of pioneering brands," Working papers 1140-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    8. Marco, Alan C., 2006. "The Value of Certainty in Intellectual Property Rights: Stock Market Reactions to Patent Litigation," Vassar College Department of Economics Working Paper Series 82, Vassar College Department of Economics.
    9. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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