Prescribing originality: investigating the impact of original knowledge on patent quality in the pharmaceutical sector

Kristie Briggs

Journal of Entrepreneurship and Public Policy, 2021, vol. 10, issue 1, 78-97

Abstract: Purpose - This paper examines the relationship between the originality of a pharmaceutical innovation and its patent quality. Greater patent quality has been shown in the extant literature to enhance market value, which better enables firms to recoup research and development (R&D) expenditures incurred during the innovation process. Understanding how originality improves patent quality can assist policymakers, when determining the optimal length of pharmaceutical patent protection and/or market exclusivity. Design/methodology/approach - The relationship between originality and patent quality is empirically investigated using a tobit, as well as a zero-inflated negative binomial, estimation approach to account for prevalence of patents receiving zero forward citations. Moderating effects of joint innovation, innovation by a university researcher and innovation by an established innovator on originality are also considered. Findings - There is a robust and positive relationship between patent originality and quality in the pharmaceutical sector. This relationship is positively moderated by joint patent ownership with a university. As such, innovators that target originality in new drug development (especially those collaborating with universities) should, according to extant literature, see greater increases in their market value. Originality/value - Policymakers can use information on the originality of a new drug to discern the optimal length of market exclusivity needed to enable the innovator to recoup expenditures related to R&D. Better predictions of the timing for which firms can recoup R&D expenditures will equip policymakers with knowledge about the appropriate timing to introduce competition into the market, which is critical to reducing the price of pharmaceuticals to consumers.

Keywords: Innovation; Quality; Pharmaceuticals; Originality; Patents; O31; O30; L65 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jepppp:jepp-09-2020-0071

DOI: 10.1108/JEPP-09-2020-0071

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