The Impact of Drug Approval-Patent Linkage System on Patent Applications: Evidence from the KORUS FTA

Abstract

Purpose - This paper empirically investigates the impact of strengthened intellectual property rights (IPRs) within the KORUS Free Trade Agreement (FTA) on patent applications filed by domestic pharmaceutical companies in Korea.
 Design/methodology - In this study, the distribution of the dependent variable is assumed to follow a Poisson or a negative binomial distribution, given the count nature of the dependent variable. Therefore, it can be estimated through the Panel Count Model. The study utilizes Poisson panel analysis and negative binomial panel analysis.
 Findings - The results of the negative binomial panel analysis and the Poisson panel analysis affirm that the conclusion of the KORUS-FTA had a significantly positive effect on the number of patent applications by domestic pharmaceutical companies. These findings suggest that domestic pharma- ceutical companies actively sought patents following the signing of the KORUS-FTA, driven by the “drug approval-patent linkage system” designed to fortify intellectual property rights for drugs.
 Originality/value - Limited empirical research has been conducted on the drug approval-patent linkage system in the KORUS-FTA. This study empirically confirmed the impact of institutional changes in the pharmaceutical industry on patent applications at the corporate level within the KORUS-FTA context. Such insights are crucial for formulating strategies for pharmaceutical companies and indicating policy directions for the pharmaceutical industry in the future.