Opening the Black Box of Pharmaceutical Patent Value: An Empirical Analysis

Abstract

Patents and patent valuation have raised tremendous concerns from the research-based pharmaceutical industry for a long time. Questions about the valuation of drug patent portfolios, the assessment of research and development (R&D) performance or innovation output, and the competitive position of different firms in the industry all tend to revolve around the basic question of pharmaceutical patent valuation. This article aims to validate the impact of pharmaceutical technology characteristics on patent value and to optimize classic patent valuation methods in the drug field. We selected 913 patents in the “Orange Book” of the US Food and Drug Administration as the sample, employed established patent value indicators (EPVI) and pharmaceutical technology details indicators (PTDI) as key predictors for pharmaceutical patent value (the value of pharmaceutical patents), and further conducted multiple-variable analysis. It was found that PTDI significantly influences pharmaceutical patent value and, more important, enhances the quality of existing valuation methods. Moreover, the marginal effect of individual predictors on patent value is quantitatively measured. For example, new chemical entities and new dosage forms increase the value by 62% and 60%, and orphan drug and pediatric drug classification decrease the value by 7%> and 10%>, respectively. In addition, the potential commercial applications of this method are briefly explored in view of the early stage, high-efficiency, and low-cost characteristics of all value predictors in this method.