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Patents, Data Exclusivity, and the Development of New Drugs

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  • 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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    3. 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.
    4. Wang, Lucy Xiaolu, 2022. "Global drug diffusion and innovation with the medicines patent pool," Journal of Health Economics, Elsevier, vol. 85(C).
    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

    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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