Marketing authorization and strategic patenting: Evidence from pharmaceuticals

Abstract

Patents can incentivize innovation, but pharmaceutical firms often extend market exclusivity by patenting minor modifications to existing drugs, raising concerns about low-novelty patents that add little therapeutic value. This study examines how patenting behavior changes after marketing authorization, a regulatory milestone that makes clinical trial data public and thereby creates “prior art” that limits future patent claims. Using a novel European patent–drug dataset and event study methods, we exploit plausibly exogenous variation in the time from patent priority filing to marketing authorization. We find a significant decline in strategic patenting after authorization, particularly in secondary patents and those covering the same disease areas. In contrast, follow-on product patents and patents for new disease areas remain stable, suggesting that authorization selectively curbs low-novelty filings. Both originators and other firms respond similarly, though at different speeds. The absence of similar responses after earlier milestones indicates increased difficulty in obtaining or enforcing low-value patents as the likely mechanism. Robustness checks – including alternative difference-in-differences estimators, constant exclusivity samples, and analyses accounting for non-European market incentives, firm characteristics, and instrumental variable approaches – support our conclusions. Our findings show how regulatory data transparency can indirectly improve patent quality.