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Optimal Patent Policy for Pharmaceutical Industry

Author

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  • Izhak, Olena
  • Saxell, Tanja
  • Takalo, Tuomas

Abstract

We show how characterizing optimal patent policy for the pharmaceutical industry only requires information about generic producers’ responses to changes in the effective duration and scope of new drug patents. To estimate these responses, we use data on Paragraph IV patent challenges, and two quasi-experimental approaches: one based on changes in patent laws and another on the allocation of patent applications to examiners. We find that extending effective patent duration increases generic entry via Paragraph IV patent challenges whereas broadening protection reduces it. Our results imply that pharmaceutical patents should be made shorter but broader.

Suggested Citation

  • Izhak, Olena & Saxell, Tanja & Takalo, Tuomas, 2020. "Optimal Patent Policy for Pharmaceutical Industry," Working Papers 131, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:131
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    File URL: https://www.doria.fi/handle/10024/177356
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    More about this item

    Keywords

    patent policy; pharmaceuticals; generic entry; innovation; imitation; Business regulation and international economics; I18; K20; L13; O34; O31; Terveyspalvelut;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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