Marketing Authorization and Strategic Patenting: Evidence from Pharmaceuticals

Abstract

Patents can encourage innovation, but pharmaceutical firms often extend market exclusivity with secondary patents on minor improvements, raising concerns over weak patents. This study examines how patenting behavior changes after marketing authorization (MA), which makes clinical trial data public and creates "prior art" that affects subsequent patenting. Using a novel European patent-drug dataset and event study methods, we explore plausible exogenous variations in the time from patent priority filing to MA. We find a significant decline in strategic patenting post-MA, particularly in secondary patents and those targeting the same disease areas. In contrast, follow-on product patents and patents for new disease areas remain stable, indicating that MA curbs relatively weak patents. Both originators and other firms adjust similarly, though at different speeds. These reactions, combined with the absence of similar responses after earlier milestones, suggest that increased difficulty in obtaining or enforcing weak patents drives our results. Robustness checks using alternative difference-in-differences estimators, constant exclusivity samples, and analyses accounting for non-European market incentives, firm characteristics, and instrumental variable approaches strengthen our results. Our findings highlight how regulatory processes can indirectly improve patent quality. 

Keywords: patentability standards, strategic patenting, follow-on innovation, drugs, marketing authorization

JEL Classification: O3, I1, K2