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Patents, Data Exclusivity, and the Development of New Drugs

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  • Gaessler, Fabian

    (MPI-IC Munich)

  • Wagner, Stefan

    (ESMT Berlin)

Abstract

Pharmaceutical firms typically enjoy market exclusivity for new drugs from concurrent protection of the underlying invention (through patents) and the clinical trials data submitted for market approval (through data exclusivity). Patent invalidation during drug development renders data exclusivity the sole source of protection and shifts the period of market exclusivity at the project level. 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 hereby provide first estimates of the responsiveness of R&D investments to market exclusivity expectations.

Suggested Citation

  • Gaessler, Fabian & Wagner, Stefan, 2019. "Patents, Data Exclusivity, and the Development of New Drugs," Rationality and Competition Discussion Paper Series 176, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:176
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    Cited by:

    1. Wagner, Stefan & Sternitzke, Christian & Walter, Sascha, 2022. "Mapping Markush," Research Policy, Elsevier, vol. 51(10).
    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. Wang, Lucy Xiaolu, 2022. "Global drug diffusion and innovation with the medicines patent pool," Journal of Health Economics, Elsevier, vol. 85(C).
    4. 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.
    5. 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.

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    More about this item

    Keywords

    patents; drugs; data exclusivity; clinical trials;
    All these keywords.

    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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