The Review of Economics and Statistics Vol. 104 No. 3 2022

Patents, Data Exclusivity, and the Development of New Drugs

Fabian Gaessler¹; Stefan Wagner²

¹ Max Planck Institute for Innovation and Competition · ² European School of Management and Technology

Abstract

Pharmaceutical firms enjoy market exclusivity for new drugs from concurrent patent protection and exclusivity of the clinical trials data submitted for market approval. Patent invalidation during drug development renders data exclusivity the sole source of protection and shifts the period of market exclusivity. In instrumental variables regressions, we quantify the effect of a one-year reduction in expected market exclusivity on the likelihood of drug commercialization. The effect is largely driven by patent invalidations early in the drug development process and by the responses of large originators. We provide estimates of the responsiveness of R&D investments to market exclusivity expectations.

DOI

10.1162/rest_a_00987

Volume

104

Issue

3

Pages

571-586

Language

en

Sources

openalex crossref