Optimal Patent Policy for Pharmaceutical Industry
VATT Institute for Economic Research Working Papers 131
62 Pages Posted: 18 Jun 2020
Date Written: May 20, 2020
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.
Keywords: patent policy, pharmaceuticals, generic entry, innovation, imitation
JEL Classification: I18, K20, L13, O34, O31
Suggested Citation: Suggested Citation