Supplementary Protection Certificates and the Direction of R&D

In 1993, the European Union extended the term of intellectual property rights (IPRs) for pharmaceutical products by introducing a Supplementary Protection Certificate (SPC) regime, which aims at compensating the pharmaceutical industry for the lengthy and risky development process for new drugs. This IPR scheme provides up to an additional five years of market exclusivity conditional upon the commercialization lag of a newly developed drug. Related to other research showing that the typical duration of clinical trials depends on the disease and the stage of disease, the SPC regime should set differential R&D incentives on the disease-level. Using the source of variation provided by the SPC regime, this early-stage research project empirically investigates the shift of pharmaceutical R&D investments after the introduction of this market exclusivity term extension.