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Optimal Incentives for Patent Challenges in the Pharmaceutical Industry

Author

Listed:
  • Enrico Böhme

    (Philipps-University Marburg)

  • Jonas Severin Frank

    (Bundeskartellamt (Federal Cartel Office))

  • Wolfgang Kerber

    (Philipps-University Marburg)

Abstract

In this paper, we show that a provision in antitrust law to allow patent settlements with a later market entry of generics than the date that is expected under patent litigation can increase consumer welfare. We introduce a policy parameter for determining the optimal additional period for collusion that would incentivize the challenging of weak patents and maximize consumer welfare. While in principle, later market entry leads to higher profits and lower consumer welfare, this can be more than compensated for if more patents are challenged as a result.

Suggested Citation

  • Enrico Böhme & Jonas Severin Frank & Wolfgang Kerber, 2021. "Optimal Incentives for Patent Challenges in the Pharmaceutical Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(3), pages 503-528, November.
    • Handle: RePEc:kap:revind:v:59:y:2021:i:3:d:10.1007_s11151-021-09815-0
    DOI: 10.1007/s11151-021-09815-0
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    References listed on IDEAS

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    Cited by:

    1. Ding, Yucheng & Zhao, Xin, 2019. "Pay-for-delay patent settlement, generic entry and welfare," International Journal of Industrial Organization, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Antitrust; Collusion; Patent challenges; Patent settlements; Pharma;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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