Estimating the value of generic entry and intellectual property litigation in the pharmaceutical market

- We estimate the value of the market entry of generic and intellectual property litigation.
- The unique panel data allow us to examine the value via difference-in-differences.
- Generic market entry decreases sales of branded pharmaceuticals by 45%.
- Litigation of IP rights increases sales of branded pharmaceuticals by 120%.

In this study, we examine the relationship between, and implications of, the market entry and intellectual property litigation of brand name and generic pharmaceuticals from 2003 to 2012 in Japan. We focus on the effects of a firm's litigation behavior on market competition, including not only anticipated damage and injunction costs but also reputation and reliability costs. The results show that market entry of generic pharmaceuticals decreases market sales of brand name pharmaceuticals by 45%. However, in the case of intellectual property rights, litigation increases market sales of branded pharmaceuticals by 120%.