Patent protection, creative destruction, and generic entry in pharmaceuticals: Evidence from patent and pricing data

Alan C. Marco ()

No 83, Vassar College Department of Economics Working Paper Series from Vassar College Department of Economics

Abstract: This paper merges patent citation data with data on pharmaceutical patent expirations, generic entry, and pricing to explore the effects of observable patent characteristics on off-patent and on-patnet pharmaceutical pricing. Using a sample of drug patents facing generic entry in the 1990s, I find that the price of branded drugs increased on average in the face of generic entry. Importantly, I find that the number of patent citations that a drug receives from other firms is correlated with a decrease in markup and a decrease in the duration of the markup. Conversely, self-citations are correlated with higher prices and slower decay in prices. The results indicate that patent citations may signal the degree of inter-molecule substitution. And, importantly, self-citations may indicate a degree of cumulative patenting that enables a firm to effectively extend or strengthen the original patent protection. This research takes a step forward in understanding the distinction between “positive” citations and “negative” citations related to creative destruction.

New Economics Papers: this item is included in nep-com, nep-ent, nep-ino, nep-ipr and nep-tid
Date: 2006-11
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