IDEAS home Printed from https://ideas.repec.org/a/tpr/amjhec/v3y2017i1p33-59.html
   My bibliography  Save this article

Pharmaceutical Patent Challenges: Company Strategies and Litigation Outcomes

Author

Listed:
  • Henry Grabowski

    (Duke University)

  • Carlos Brain

    (Cornerstone Research)

  • Anna Taub

    (Cornerstone Research)

  • Rahul Guha

    (Cornerstone Research)

Abstract

The pharmaceutical industry has experienced a large number of patent challenges in recent years. Key catalysts for this were legal and regulatory changes that awarded 180-day exclusivity rights for first-filing generic firms not only on the basis of a court victory, but also through a settlement with the patent owner. In this paper, we have assembled a unique data set on new drugs approved from 1994 to 2006, including detailed information on patent challenges and litigation outcomes. We find that the new regulatory environment induced significant behavioral changes, including racing by generic firms to challenge patents for large-selling drugs in an environment where more patents are filed by branded firms. Increased generic challenges to different types of patent claims are linked to reduced market exclusivity periods for branded drugs, based on regression analyses and litigation outcomes. Settlements that allow entry prior to patent expiry are a prevalent litigation outcome given the risks of an unfavorable court decision that can adversely affect a company's market valuation. This topic remains an important issue for further research, particularly given different public policies governing patent challenges for biosimilars and biologics compared with those for generic drugs and new chemical entities.

Suggested Citation

  • Henry Grabowski & Carlos Brain & Anna Taub & Rahul Guha, 2017. "Pharmaceutical Patent Challenges: Company Strategies and Litigation Outcomes," American Journal of Health Economics, MIT Press, vol. 3(1), pages 33-59, Winter.
    • Handle: RePEc:tpr:amjhec:v:3:y:2017:i:1:p:33-59
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/AJHE_a_00066
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. DiMasi, Joseph A. & Grabowski, Henry G. & Hansen, Ronald W., 2016. "Innovation in the pharmaceutical industry: New estimates of R&D costs," Journal of Health Economics, Elsevier, vol. 47(C), pages 20-33.
    2. Keith M. Drake & Martha A. Starr & Thomas G. McGuire, 2015. "Do "Reverse Payment" Settlements Constitute an Anticompetitive Pay-for-Delay?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(2), pages 173-200, July.
    3. Lee Branstetter & Chirantan Chatterjee & Matthew J. Higgins, 2014. "Generic Competition and the Incentives for Early-Stage Pharmaceutical Innovation," NBER Working Papers 20532, National Bureau of Economic Research, Inc.
    4. Hemphill, C. Scott & Sampat, Bhaven N., 2012. "Evergreening, patent challenges, and effective market life in pharmaceuticals," Journal of Health Economics, Elsevier, vol. 31(2), pages 327-339.
    5. Henry G. Grabowski & Margaret Kyle, 2007. "Generic competition and market exclusivity periods in pharmaceuticals," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 491-502.
    6. Panattoni, Laura E., 2011. "The effect of Paragraph IV decisions and generic entry before patent expiration on brand pharmaceutical firms," Journal of Health Economics, Elsevier, vol. 30(1), pages 126-145, January.
    7. Eric Budish & Benjamin N. Roin & Heidi Williams, 2015. "Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials," American Economic Review, American Economic Association, vol. 105(7), pages 2044-2085, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fernando Cruz Aranda & Antonia Terán Bustamante, 2019. "Valuation of an investment project in research and development in the pharmaceutical industry," Contaduría y Administración, Accounting and Management, vol. 64(1), pages 43-44, Enero-Mar.
    2. Michael D. Frakes & Melissa F. Wasserman, 2020. "Investing in Ex Ante Regulation: Evidence from Pharmaceutical Patent Examination," NBER Working Papers 27579, National Bureau of Economic Research, Inc.
    3. Tobias Basse & Christoph Schwarzbach & J.-Matthias Schulenburg, 2023. "Dividend policy issues in the European pharmaceutical industry: new empirical evidence," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(5), pages 803-816, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lee Branstetter & Chirantan Chatterjee & Matthew J. Higgins, 2014. "Generic Competition and the Incentives for Early-Stage Pharmaceutical Innovation," NBER Working Papers 20532, National Bureau of Economic Research, Inc.
    2. Hu, Mei-Ying & Lu, You-Xun & Lai, Ching-chong, 2023. "Patent term extensions and commercialization lags in the pharmaceutical industry: A growth-theoretic analysis," Journal of Macroeconomics, Elsevier, vol. 76(C).
    3. Michael D. Frakes & Melissa F. Wasserman, 2020. "Investing in Ex Ante Regulation: Evidence from Pharmaceutical Patent Examination," NBER Working Papers 27579, National Bureau of Economic Research, Inc.
    4. Branstetter, Lee & Chatterjee, Chirantan & Higgins, Matthew J., 2022. "Generic competition and the incentives for early-stage pharmaceutical innovation," Research Policy, Elsevier, vol. 51(10).
    5. Fabian Gaessler & Stefan Wagner, 2022. "Patents, Data Exclusivity, and the Development of New Drugs," The Review of Economics and Statistics, MIT Press, vol. 104(3), pages 571-586, May.
    6. Ding, Yucheng & Zhao, Xin, 2019. "Pay-for-delay patent settlement, generic entry and welfare," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    7. Eric Helland & Seth A. Seabury, 2016. "Are Settlements in Patent Litigation Collusive? Evidence from Paragraph IV Challenges," NBER Working Papers 22194, National Bureau of Economic Research, Inc.
    8. Matthew J. Higgins & Mathias J. Kronlund & Ji Min Park & Joshua Pollet, 2020. "The Role of Assets In Place: Loss of Market Exclusivity and Investment," NBER Working Papers 27588, National Bureau of Economic Research, Inc.
    9. Kyle, Margaret K., 2022. "Incentives for pharmaceutical innovation: What’s working, what’s lacking," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    10. Murray L. Aitken & Ernst R. Berndt & Barry Bosworth & Iain M. Cockburn & Richard Frank & Michael Kleinrock & Bradley T. Shapiro, 2013. "The Regulation of Prescription Drug Competition and Market Responses: Patterns in Prices and Sales following Loss of Exclusivity," NBER Chapters, in: Measuring and Modeling Health Care Costs, pages 243-271, National Bureau of Economic Research, Inc.
    11. Gamba, Simona & Magazzini, Laura & Pertile, Paolo, 2021. "R&D and market size: Who benefits from orphan drug legislation?," Journal of Health Economics, Elsevier, vol. 80(C).
    12. Böhm, Sebastian & Grossmann, Volker & Strulik, Holger, 2021. "R&D-driven medical progress, health care costs, and the future of human longevity," The Journal of the Economics of Ageing, Elsevier, vol. 18(C).
    13. Eric Budish & Benjamin Roin & Heidi Williams, 2013. "Do fixed patent terms distort innovation? Evidence from cancer clinical trials," Discussion Papers 13-001, Stanford Institute for Economic Policy Research.
    14. Farasat A. S. Bokhari & Franco Mariuzzo & Anna Rita Bennato, 2021. "Innovation and growth in the UK pharmaceuticals: the case of product and marketing introductions," Small Business Economics, Springer, vol. 57(1), pages 603-634, June.
    15. Yin, Nina, 2023. "Pharmaceuticals, incremental innovation and market exclusivity," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    16. Stacy Sneeringer & Matt Clancy, 2020. "Incentivizing New Veterinary Pharmaceutical Products to Combat Antibiotic Resistance," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(4), pages 653-673, December.
    17. Sanzenbacher, Geoffrey T. & Wettstein, Gal, 2020. "Drug insurance and the strategic behavior of drug manufacturers: Evergreening and generic entry after Medicare Part D," Journal of Health Economics, Elsevier, vol. 72(C).
    18. Leila Agha & Soomi Kim & Danielle Li, 2020. "Insurance Design and Pharmaceutical Innovation," NBER Working Papers 27563, National Bureau of Economic Research, Inc.
    19. Anita Rao, 2020. "Strategic Research and Development Investment Decisions in the Pharmaceutical Industry," Marketing Science, INFORMS, vol. 39(3), pages 564-586, May.
    20. Margaret K. Kyle, 2019. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 95-123, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    pharmaceuticals; Hatch-Waxman Act; patent challenges; market exclusivity; generic competition;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:amjhec:v:3:y:2017:i:1:p:33-59. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.