Why Pharmaceutical Patent Thickets Are Unique

Abstract

Companies have protected their products with large portfolios of patents. The drug company AbbVie, for example, has collected more than 100 patents on its blockbuster drug Humira. Many have raised concerns about such “patent thickets” in the pharmaceutical industry, which has become a pressing concern given the increasing frequency of thickets and effects on patients’ lives. In response, some have downplayed concern by pointing to large patent portfolios in other industries, in particular, high technology. This Essay offers the first refutation of this argument, explaining why it fails on two basic levels.

First, pharmaceutical companies have all of the patents they need to enter the market. As a result, they do not need to license, instead accumulating patents to block rivals. In contrast, because of the presence of patents from multiple owners in products, high-technology firms need to engage in “cross licensing,” which leads them to amass patents. Exclusion is exacerbated by the pharmaceutical industry’s higher regulatory barriers and firm concentration.

Second, we offer original empirical evidence supporting our hypothesis that pharmaceutical firms use duplicative patents to block market entry. We learn useful information from an analysis of “continuation patents,” which are duplicative patents that cannot disclose any new matter. We find that continuations have recently increased in the pharmaceutical industry, especially as compared to the high-technology industry. We also find that the pharmaceutical industry litigates continuation patents at a much higher rate than the high-technology industries, which is consistent with keeping rivals off the market. We show similar results for “method-of-use patents,” which drug firms have used to delay generic entry, and for the Humira patent thicket.

Keywords: patents, thickets, pharmaceuticals, drugs, high technology, continuations, Humira

JEL Classification: I18, K21, L40, L41, L43, L63, L65, O34, O38