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

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.

Citation

Briggs, K. (2021), "Prescribing originality: investigating the impact of original knowledge on patent quality in the pharmaceutical sector", Journal of Entrepreneurship and Public Policy, Vol. 10 No. 1, pp. 78-97. https://doi.org/10.1108/JEPP-09-2020-0071