Does the Patent Linkage System Prolong Effective Market Exclusivity? Recent Evidence From the Korea-U.S. Free Trade Agreement in Korea

Abstract

This study evaluated the effect of the patent linkage system, fully introduced by the Korea-U.S. Free Trade Agreement in 2015, on patent challenges and the effective market exclusivity of new medicines in Korea. We used pharmaceutical approval data and pharmaceutical litigation data to detect new medicines and their counterparts, to collect patent challenges against new medicines, and to calculate effective market exclusivity for new medicines. Then, a nonparametric event history model was applied to statistically explain the duration of the market exclusivity of new medicines. Between 2007 and 2011, a total of 94 new medicines, consisting of 82 new chemical entities and 12 new biologics, were approved. The patent linkage system encouraged patent litigations to occur sooner, with a race to challenge the patents by various generic applicants. However, it was difficult to conclude that patent challenges had a significant impact on the prolongation of effective market exclusivity. The patent linkage system had a neutral effect on the effective market exclusivity of new medicines and encouraged patent challenges without abbreviating effective market exclusivity. In addition, this study highlights an important issue regarding biologics that has not been the subject of market competition, even for patent challenges.