Sharpen Your Sword for Litigation : The Reaction of Branded Pharmaceutical Firms to the Threat of Generic Entry

We study the patent strategy of pharmaceutical firms in reaction to the threat of generic entry. Estimating difference-in-differences saturated with a host of fixed effects, we show that while these firms continue to produce patents after a drug is approved by the US Food and Drug Administration (FDA), they list more of these patents in the Orange Book’s public repository once the threat of generic entry materializes via a Paragraph IV challenge. By doing so, firms prepare for litigation. Indeed, the added patents are disproportionately used in litigations and appear to be effective in delaying generic market entry. The detected strategy is especially employed when highly-demanded drugs are challenged, a firm’s profitability relies on only a few drugs, these drugs have remaining patent protection, and in order to protect new chemical entities