Marketing Authorization and Strategic Patenting

Patents can incentivize innovation but are often overused by pharmaceutical firms to extend market exclusivity with secondary patents on marginal improvements. Such behaviors raise questions on whether to increase the bar of what is patentable. This study, presented in the ZEW Research Seminar, investigates how pharmaceutical firms change patenting behavior after drug product approval (i.e., marketing authorization), when the clinical trial data submitted during the approval process can become novelty-threatening prior art. Utilizing a unique European patent-drug dataset and event study methods, the authors explore plausible exogenous variations in the time from patent priority filing to drug approval. Their findings show a significant drop in strategic patenting post-authorization, while meaningful innovations persist. This trend appears driven by the enforceability challenges of marginal patents post-approval. Analyzing sub-categories by firm, patent, and diseases, the authors find that higher post-marketing patent standards, backed by examiner scrutiny and firm adjustments, enhance welfare and improve follow-up invention quality.