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  3. American Economic Journal: Applied Economics
  4. October 2016
  5. Patents as a Spur to Subsequent Innovation? Evidence from Pharmaceuticals

Patents as a Spur to Subsequent Innovation? Evidence from Pharmaceuticals

  • Duncan S. Gilchrist
American Economic Journal: Applied Economics
vol. 8, no. 4, October 2016
(pp. 189-221)
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Abstract

This paper examines how an incumbent's patent protection acts as an implicit subsidy toward non-infringing substitutes. I analyze whether classes of pharmaceuticals whose first entrant has a longer period of market exclusivity (time between approval and generic entry) see more subsequent entry. Instrumenting for exclusivity using plausibly exogenous delays in the development process, I find that a one-year increase in the first entrant's market exclusivity increases subsequent entry by 0.2 drugs. The effect is stronger for subsequent entrants that are lesser clinical advances, suggesting it is driven primarily by imitation.

Citation

Gilchrist, Duncan S. 2016. "Patents as a Spur to Subsequent Innovation? Evidence from Pharmaceuticals." American Economic Journal: Applied Economics, 8 (4): 189-221. DOI: 10.1257/app.20150373

Additional Materials

JEL Classification

  • K11 Property Law
  • L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
  • O31 Innovation and Invention: Processes and Incentives
  • O34 Intellectual Property and Intellectual Capital
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