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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, University of Chicago Press, vol. 3(1), pages 33-59, Winter.
    • Handle: RePEc:ucp:amjhec:v:3:y:2017:i:1:p:33-59
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    File URL: https://www.journals.uchicago.edu/doi/pdf/10.1162/AJHE_a_00066
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    Citations

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    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.

    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

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