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Patents, Data Exclusivity, and the Development of New Drugs

Author

Listed:
  • Fabian Gaessler
  • Stefan Wagner

Abstract

Pharmaceutical firms enjoy market exclusivity for new drugs from concurrent patent protection and exclusivity of the clinical trials data submitted for market approval. Patent invalidation during drug development renders data exclusivity the sole source of protection and shifts the period of market exclusivity. In instrumental variables regressions, we quantify the effect of a one-year reduction in expected market exclusivity on the likelihood of drug commercialization. The effect is largely driven by patent invalidations early in the drug development process and by the responses of large originators. We provide estimates of the responsiveness of R&D investments to market exclusivity expectations.

Suggested Citation

  • 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.
    • Handle: RePEc:tpr:restat:v:104:y:2022:i:3:p:571-586
    DOI: 10.1162/rest_a_00987
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    Citations

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    Cited by:

    1. Jia, Xiao & Li, Xiaoxi & Liu, Boluo & Shao, Nan, 2025. "Centralized procurement authority and corporate innovation," China Economic Review, Elsevier, vol. 94(PB).
    2. Dongri Han & Ke Lu & Peisen Liu, 2025. "Multiplication of number and quality rise: data elements enable low-carbon innovation," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-17, December.
    3. Wang, Lucy Xiaolu & Zahur, Nahim Bin, 2025. "Procurement institutions and essential drug supply in low and middle-income countries," Journal of Health Economics, Elsevier, vol. 101(C).
    4. Wang, Lucy Xiaolu, 2022. "Global drug diffusion and innovation with the medicines patent pool," Journal of Health Economics, Elsevier, vol. 85(C).
    5. 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).
    6. Kaiwei Jia & Yanlin Chen, 2025. "Research on the Impact of Data Factors on Enterprise Green Innovation—Evidence from Chinese Manufacturing Enterprises," Sustainability, MDPI, vol. 17(5), pages 1-20, March.
    7. Annamaria Conti & Leonardo Ortega & Elie Sung, 2025. "Sharpen Your Sword for Litigation: Incumbent Strategic Reaction to the Threat of Entry," Management Science, INFORMS, vol. 71(1), pages 803-824, January.
    8. Byrski, Dennis & Wang, Lucy Xiaolu, 2025. "Marketing authorization and strategic patenting: Evidence from pharmaceuticals," Journal of Public Economics, Elsevier, vol. 247(C).
    9. David Dranove & Craig Garthwaite & Manuel Hermosilla, 2022. "Does consumer demand pull scientifically novel drug innovation?," RAND Journal of Economics, RAND Corporation, vol. 53(3), pages 590-638, September.
    10. Wagner, Stefan & Sternitzke, Christian & Walter, Sascha, 2022. "Mapping Markush," Research Policy, Elsevier, vol. 51(10).
    11. David Dranove & Craig Garthwaite & Manuel I. Hermosilla, 2020. "Expected Profits and The Scientific Novelty of Innovation," NBER Working Papers 27093, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • 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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