Optimal Patent Policy for Pharmaceutical Industry

VATT Institute for Economic Research Working Papers 131

62 Pages Posted: 18 Jun 2020

See all articles by Olena Izhak

Olena Izhak

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Tanja Saxell

VATT

Tuomas Takalo

Bank of Finland, Monetary Policy and Research Department; VATT Institute for Economic Research

Date Written: May 20, 2020

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.

Keywords: patent policy, pharmaceuticals, generic entry, innovation, imitation

JEL Classification: I18, K20, L13, O34, O31

Suggested Citation

Izhak, Olena and Saxell, Tanja and Takalo, Tuomas, Optimal Patent Policy for Pharmaceutical Industry (May 20, 2020). VATT Institute for Economic Research Working Papers 131, Available at SSRN: https://ssrn.com/abstract=3609863 or http://dx.doi.org/10.2139/ssrn.3609863

Olena Izhak

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Tanja Saxell (Contact Author)

VATT ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Tuomas Takalo

Bank of Finland, Monetary Policy and Research Department ( email )

P.O. Box 160
Helsinki, FIN-00101
Finland

HOME PAGE: http://https://sites.google.com/site/tuomastakalo/

VATT Institute for Economic Research

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