Pharmaceutical firms produce patents related to existing drugs even after approval by the US Food and Drug Administration. We investigate the reasons behind this strategy and relate them to generic entry threats. Estimating difference-in-differences models saturated with fixed effects, we show the threat of generic entry via Paragraph IV challenges induces pharmaceutical firms to increase the number of patents they add to an FDA-approved drug application. This strategy is aimed at fencing the firms’ existing drugs as we find no evidence that firms generate new drugs or modifications to the existing drugs after a Paragraph IV challenge. Additionally, we provide evidence showing that the added patents are negatively related to the hazard of generic entry. Consistent with patents being a double-edged sword, which protects drugs but reveals information to competitors, we find that listing all patents at the filing of a drug application is not as effective against generic entry as adding them later on.
Ansprechpartner: Fabian Gaessler