18 The Impact of Revisions of the Patent System on
Innovationin the Pharmaceutical Industry（*）
Research Fellow: Kenta Kosaka
In the pharmaceutical industry, the development of new drugs not only requires a great deal of time andmoney, but also has a low success rate. At the same time, it does not cost as much to copy a new drug as todevelop one. Consequently, the patent system is extremely important in securing incentives for the development of
new drugs in the pharmaceutical industry. The objective of this study is to examine in empirical terms theimpact that revisions of the patent system have on innovation by companies in the pharmaceutical industry, inwhich the patent system is so exceedingly important. More specifically, using corporate financial data and patentdata, this paper quantitatively evaluates whether the introduction of substance patent system in Japan in 1976
increased research and development expenditure and invention activities leading to the acquisition of substancepatents at Japanese pharmaceutical companies. From the investigation of this topic, it emerged that there has
been an increase in both research and development expenditure and the number of substance patents at Japanesepharmaceutical companies as a result of the introduction of the substance patent system in Japan in 1976.
Accordingly, one can say that the strengthening of patent rights in the form of the introduction of substancepatent system has encouraged innovation in the pharmaceutical industry.

I

Introduction

Since the promotion in the USA in the early
1980s of a policy that strengthened the protectionof intellectual property rights, called the pro-patent
policy, policies that strengthen intellectual
property rights have been implemented in many
developed countries. One of the factors behindthese policies is said to have been the view thatstrengthening the protection of intellectual
property rights stimulates innovation activities on
the part of companies. Thus, intellectual property
rights and innovation are closely related and many
economic theories have been propounded
concerning intellectual property rights andinnovation.
In traditional economic arguments, thestrengthening of intellectual property rights has
been considered to reinforce the appropriability of
research and development output, which
encourages research and development activities bycompanies. However, strengthening intellectual
property rights leads to the strengthening of
exclusive rights in regard to inventions, whichbrings about a decline in economic welfare. Thus,in arguments based on traditional economics, it
was thought that the strengthening of intellectual

property rights should be determined withconsideration for the trade-off between the
promotion of innovation and the decline ineconomic welfare resulting from the strengtheningof exclusive rights. However, in recent economic
theory, it has been asserted that intellectual
property rights have an impact on innovation
through more diverse channels, not only the
traditional relationship between intellectual
property rights and innovation in this kind of
economics. More specifically, Edmund Kitch (1977)
argued that granting patent rights in regard toideas that have not been commercialized leads tothe prevention of overlapping investment and freeriders, thereby encouraging investment in ideasthat have not been commercialized. This theory iscalled the "prospect theory". Whereas traditional
economics emphasizes increasing prior incentives
to invention as a result of the strengthening ofpatent rights strengthening monopoly power, thistheory attaches importance to the effect resulting
from the granting of patent rights, in terms ofincreasing incentives to ex post facto investment ininventions that have not been commercialized. For
example, in the pharmaceutical industry, even if a
new compound that could become a drug candidate
is invented, a vast amount of investment, such as(*) This is an English translation of the summary of the report published under the Industrial Property Research Promotion
Project FY2011 entrusted by the Japan Patent Office. IIP is entirely responsible for any errors in expression or
description of the translation. When any ambiguity is found in the English translation, the original Japanese text shall be
prevailing.
●

IIP Bulletin 2012 Vol.21

1 ●that associated with clinical trials, is required for
its commercialization. Based on prospect theory, it
is conceivable that granting patent rights to newcompounds that could become drug candidates
would have the effect not only of increasing
incentives for the invention of new compounds, butalso of increasing incentives for investment, suchas in ex post facto clinical trials.
What one ascertains from these recent
advances in economic theory relating tointellectual property rights and innovation is thatthe relationship between the two is not a simple
one, in which strengthening intellectual property
rights encourages innovation; rather, therelationship differs greatly, depending on thenature of innovation in each individual industry.
The degree to which the strengthening of patentrights contributes to innovation is not uniform
across all industries, but differs considerably
between each industry. Accordingly, in empiricalstudies of economic theory concerning intellectual
property rights and innovation, in addition tocross-industry empirical research, it will be
important to conduct empirical research focused on
individual industries.
It is important to conduct empirical analysis ofintellectual property rights and innovation focusedon individual industries in this way. The objectiveof this study is to evaluate in empirical terms theimpact on the research and development activities
and innovation of the Japanese pharmaceuticalindustry in particular, which resulted from thesubstance patent system introduced in Japan in
1976. In addition, it aims to use financial data andpatent data at the company level to elucidate
whether or not the strengthening of patent rights in
the Japanese pharmaceutical industry encouraged
research and development activities and innovation.
The main empirical results of this research are
as follows. Firstly, the introduction of substancepatent system in Japan in 1976 increased researchand development expenditure by Japanesepharmaceuticalcompanies.
Moreover,the
introduction of the substance patent system inJapan in 1976 gave rise to an increase in thenumber of substance patents amongst the patents
registered in the US by Japanese pharmaceuticalcompanies, demonstrating that as a result of theintroduction of substance patent system, Japanesepharmaceutical companies increased the number of
their inventions of chemical substances.

●

Ⅱ Patent Rights in the PharmaceuticalIndustry and the Introduction of
Substance Patent System
In the pharmaceutical industry, research anddevelopment is exceedingly important. According
to the Japan Pharmaceutical Manufacturers
Association Data Book 2011, whereas the
proportion of sales accounted for by researchexpenditure by industry is 4% on average inmanufacturing industry as a whole, it is 11.66% in
the pharmaceutical manufacturing industry. Thus,
compared with other manufacturing industry, thepharmaceutical industry is highly intensive interms of research and development, and comparedwith other industries, it is one in which researchand development is particularly crucial.
Moreover, in the pharmaceutical industry, it issaid that the development of new drugs requires avast amount of time and money. According toKuwashima (2006), it has been pointed out that"the development of pharmaceuticals takes from 10
to 20 years, and at least ¥10 billion." However, theinvention of a revolutionary new drug generates
immense income, which can be in the region of¥100 billion a year. At the same time, comparedwith the development of new drugs, copying new
drugs does not cost that much money. Thus, due tothe nature of the development of new drugs, thepharmaceutical industry is one in which patentrights are very important.
Drug patents can be classified into substancepatents, use patents and process patents; of these,
substance patents are the patents that are granted
to an actual chemical substance with a practicalapplication, such as the active ingredient in a drug.
The rights conferred by substance patents arestrong and the patent right will be effective as longas it is the same substance, no matter what process
is used in its manufacture or the purpose for which
it will be used. Accordingly, substance patents canbe said to be an extremely important form of drug
patent.
However, in Japan, substance patents and drug
use patents were not permitted until 1976.
Consequently, before 1976, only process patents
were permitted for drugs.
However, patents began to be permitted for
new chemical compounds and drugs in Japan aswell, as a result of the 1975 revision of the Patent
Act, which prescribed the adoption of substancepatent system from January 1, 1976. Morespecifically, when the original Patent Act wasenacted in 1959, drugs and substances
manufactured from chemical substances were2 ●IIP Bulletin 2012 Vol.21

excluded from the granting of patents, but as aresult of the 1975 revision, drugs and chemical
substances themselves became subject to the
granting of patents. In this way, substance patents
were introduced in 1976, but if one compares thesituation in the pharmaceutical industry that
resulted from this with the situation before theintroduction of substance patent system, one canpoint out the possibility that the cost of protecting
rights to new drugs has decreased. At the sametime, there appears to be hardly any empiricalanalysis that examines this matter in quantitative
terms. Accordingly, one can say that substantiating
the impact of the introduction of substance patent
system in Japan on innovation in thepharmaceutical industry is an important research
project.

Ⅲ Hypotheses
This chapter explains the hypotheses foranalyzing the impact that the introduction ofsubstance patentsystem in Japan in 1976 had on
innovation and research and development activities
in the pharmaceutical industry. More specifically, it
firstly examines the following two hypotheses. The
first hypothesis is that "the introduction ofsubstance patent system in Japan in 1976 caused
Japanese pharmaceutical companies to increase
their research and development expenditure." Thesecond hypothesis is that "the introduction ofsubstance patent system in Japan in 1976 caused
Japanese pharmaceutical companies to increase thenumber of their inventions of chemical
substances."
Let us firstly examine the first hypothesis.
The prospect theory of Edmund Kitch (1977) canbe cited as the economic theory behind the
hypothesis that "the introduction of substancepatent system in Japan in 1976 caused Japanesepharmaceutical companies to increase theirresearch and development expenditure." Prospect
theory attaches importance to the effect of
encouraging investment in inventions that have notyet been commercialized in the patent system. If
this theory is applied to the introduction ofsubstance patent system in Japan, one cananticipate that granting patent rights to chemical
substances that could become new drug candidates
will promote ex post facto research investment,such as clinical trials of those chemical substances,
so one can see that the prospect theory of Edmund
Kitch (1977) is behind the first hypothesis.
Details of research and development
expenditure in financial data will be used as the●

IIP Bulletin 2012 Vol.21

proxy variable for research and development
expenditure by pharmaceutical companies.
Next, let us examine the second hypothesis.
The classical approach to intellectual property
rights and innovation in economics can be cited as
the economic theory behind the hypothesis that"the introduction of substance patent system inJapan in 1976 caused Japanese pharmaceuticalcompanies to increase the number of theirinventions of chemical substances." Classicaleconomic theory concerning intellectual property
rights and innovation attaches importance to theeffect of patent rights in encouraging invention bystrengthening the appropriability of research anddevelopment output. If this economic theory isapplied to the introduction of substance patents inJapan, appropriability in regard to the invention ofchemical substances in Japan will increase as aresult of the introduction of substance patent
system in Japan, and one can anticipate that if
appropriability increases, the invention of chemical
substances will be promoted. Furthermore, use
patents for drugs were introduced in thepharmaceutical industry at the same time, so it isanticipated that the effect of this will beconsiderable, even when compared with otherchemical industries. Thus, one can see thatclassical economic theory relating to intellectual
property rights and innovation is behind the
hypothesis that "the introduction of substancepatent system in Japan in 1976 caused Japanesepharmaceutical companies to increase the numberof their inventions of chemical substances."
In this study, "the number of substance patents
amongst US patents" will be used as the proxyvariable for the invention of chemical substances
by Japanese pharmaceutical companies. If achemical substance is invented, it is likely that thepharmaceutical company concerned will acquire a
US patent in relation to that chemical substance, so
it is appropriate to use the number of substancepatents in the US as the proxy variable.
The reason why US patents rather thanJapanese patents are used as the proxy variable isthat it would be inappropriate to use the number ofJapanese patents, because changes in patentacquisition
behavior
itselfbyJapanese
pharmaceutical companies resulting from a change
in the system, namely the introduction of thesubstance patent system, would be included, rather
than the increase in substance patents resulting
from the invention of chemical substances byJapanese
pharmaceuticalcompanies
being
promoted by the introduction of substance patent
system. More specifically, before 1976, the number
3 ●of substance patents in Japan was zero, even if
chemical substances were invented, so it is not
appropriate to use the number of substance patents
as the proxy variable for the invention of chemical
substances. Substance patents were introduced in
the US since 1790, so if a Japanese pharmaceuticalcompany invented a chemical substance before
1976, it is likely that it would have acquired a
substance patent, making this an appropriate proxyvariable.
Moreover, in prior research, there are manystudies that focus on the number of patents as theproxy variable for innovation. However, this study
uses the "number of substance patents" as theproxy variable for innovation. This is because it isinappropriate to use the number of patents as theproxy variable for "inventions of chemical
substances". The reason for this is that, as
described above, prior to the introduction ofsubstance patent system in Japan in 1976, Japanesepharmaceutical companies acquired multiple
process patents with the objective of protecting
pharmaceutical substances, and compared with thesituation after the introduction of substance patent
system, there was an incentive to acquire many
process patents. Accordingly, even if theintroduction of substance patent system in Japan in
1976 triggered an increase in the invention ofchemical substances or drug uses, with the numberof substance patents and use patents increasing asa result, this was offset by the decrease in process
patents, so one cannot tell whether the number ofpatents increased. In other words, one can say that
it is not necessarily appropriate to use the numberof patents as the proxy variable for "inventions ofchemical substances".

Ⅳ Verification Techniques and Data
This chapter explains what kind of techniques
are used for verification and then specificallyexplains the data used in the empirical analysis.
1

Verification Techniques

With regard to the impact of the introductionof substance patent system on research anddevelopment expenditure, verification is conductedby means of regression analysis (least-squares
method), using financial data at the company level.
Next, with regard to the impact of the introductionof the substance patent system on the number ofsubstance patents amongst US patents and thenumber of patents, verification is conducted by●means of regression analysis (Tobit model), using
financial data and patent data at the company level.
More specifically, a technique called
difference-in-differences is used. As can be seenfrom Sakakibara, M. and Branstetter, L. (2001), one
method of analyzing the effects of policies, such as
the revision of the patent system, is a method thatinvolves comparing the situations before and after
the policy change. However, this method entails
the problem that it is not possible to distinguishbetween the impact of changes in a system and theeffect of technology shock, which has an impact on
an industry as a whole. On the other hand,difference-in-differences makes the impact ofchanges in a system distinguishable from theimpact of technology shock, to some extent.
Accordingly, this study examines the effect of therevision of the patent system, taking Japanesepharmaceutical companies as the treatment groupand US pharmaceutical companies as the control
group. Japanese pharmaceutical companies, whichconstitute the treatment group, sustain impacts
from both technology shock and the change in thesystem. On the other hand, US pharmaceuticalcompanies, which constitute the control group,
sustain the impact of technology shock, but not thechange in the system. By comparing these two, it
is possible to measure the impact of the change inthe system, whilst excluding the effect oftechnology shock.
2

Data

The next section explains the data used in theempirical analysis. The data used are financial dataand patent data for each pharmaceutical company.
Firstly, an explanation will be provided regarding
the financial data, followed by an explanation of thepatent data.
(1) Financial data
Details of each company's research anddevelopment expenditure, tangible fixed assets andsales are used as financial data. With regard to thefinancial data, information about Japanesepharmaceutical companies was gathered from the
Nikkei Economic Electronic Databank System(NEEDS), whilst details for US pharmaceuticalcompanies were gleaned from their annual reports.
Moreover, in order to eliminate the impact offluctuations in prices and exchange rates, thesedata are expressed in real terms, using the 1965
value of the Japanese yen as the reference.

4 ●IIP Bulletin 2012 Vol.21

(2) Patent data
The number of US substance patents is usedas patent data. With regard to the number ofpatents, in the case of Japanese pharmaceuticalcompanies, as a general rule, the number of US
patents registered is counted, using as a reference
the priority date corresponding to the date of theJapanese application based on which priority isclaimed. In the case of US pharmaceuticalcompanies, the number of US patents registered iscounted, using as a reference the date ofapplication for the parent application. Continuation
applications are not counted.
With regard to the method of identifying
substance patents, the claims in US patents wereidentified visually, and a patent was deemed to be a
substance patent if there was at least one claim
relating to the invention of a chemical substance.
With regard to the databases used for patent data,
Ultra Patent was used for identifying substancepatents, while Thomson Innovation was used for
identifying priority dates and parent applications.
Furthermore, the patents to be analyzed wererestricted to patents relating to drugs and classified
as Technical Class B under the Derwent World
Patents Index (DWPI) in Thomson Innovation.

Ⅴ Empirical Analysis
Firstly, this chapter explains the empiricalanalysis of the impact on research anddevelopment expenditure. The period of analysis
covers 19 years, from 1965 to 1983. The reason for
restricting the period of analysis to this period isthat the number of pharmaceutical companies forwhich data concerning research and development
expenditure can be obtained decreases markedly
when one looks for pre-1965 data. Moreover, theperiod from 1984 onwards was excluded because
the term of drug patents became to be extended
under the The Drug Price Competition and Patent
Term Restoration Act of 1984 (the Hatch-WaxmanAct)(Section 156 of US Patent Act), so that there is
the possibility that fluctuations in the number ofpatents could result from the impact of the patentterm extension system in the US.
Next, the companies subject to analysis wererestricted to a total of 33 companies, consisting of
12 US companies and 21 Japanese companies. The
reason for restricting the companies targeted tothese 33 companies is that the focus was limited tocompanies for which research and development
expenditure could be obtained for all 19 years from1965 to 1983. In general, they are major
pharmaceutical companies.
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In total, it forms panel data covering a total of
33 companies × 19 years = 627 observations, andthe sample is balanced panel data, with no entries
or withdrawals throughout the period.
The explained variable is the logarithm forresearch and development expenditure by eachcompany in each year. The explanatory variables
are the logarithm for sales by each company ineach year and the logarithm for tangible fixed
assets for each company in each year. Moreover,with regard to the nature of the research anddevelopment expenditure specific to Japanesepharmaceutical companies, a dummy variable thatis set at 1 for Japanese pharmaceutical companies
and 0 for US pharmaceutical companies is added,
multiplied by a trend term. Furthermore, a dummy
variable that is set at 0 for US pharmaceuticalcompanies, and for Japanese pharmaceuticalcompanies prior to 1976, and at 1 for Japanesepharmaceutical companies from 1976 onwards isincluded as the substance patent dummy. If this issignificantly positive, one will be able to see thatthe introduction of substance patent system has
had a positive impact on research expenditure by
Japanese pharmaceutical companies.
What can be understood from the results ofthe estimates is as follows. Firstly, the coefficientsfor sales and tangible fixed assets are 0.58 and 0.09
respectively, which are significantly positive
results. These figures demonstrate that if sales andtangible fixed assets increase, research anddevelopment expenditure also increases.
The cross term for Japanese pharmaceuticalcompanies and the trend is 0.03, which issignificantly positive. From this, one can see that,compared with US pharmaceutical companies, theresearch and development expenditure of Japanesepharmaceutical companies increases over time.
What is important is the coefficient for thesubstance patent dummy variable. The coefficientof the substance patent dummy variable is 0.21,
which is significantly positive. This suggests that,as stated above, the introduction of substancepatent system caused Japanese pharmaceuticalcompanies to increase their research anddevelopment expenditure.
Next, this chapter explains the empiricalanalysis of the impact on the number of substancepatents in the US. The period of analysis is thesame as that for the analysis of research anddevelopment expenditure, i.e. the 19 years from1965 to 1983. The companies subject to the next
analysis were restricted to a total of 20 companies,
consisting of 8 US companies and 12 Japanesecompanies. The reason for restricting the target
5 ●companies to these few was that in addition tolimiting the focus to pharmaceutical companies forwhich it was possible to obtain data concerning
research and development expenditure for thewhole of the 19-year period from 1965 to 1983, inthe case of Japanese pharmaceutical companies,
the focus was further restricted to the 12 major
pharmaceutical companies that concentrateexclusively on pharmaceuticals. Furthermore, withregard to US pharmaceutical companies, the focus
was restricted to pharmaceutical companies withno more than double the accumulated number of
US patents in the pharmaceutical field that wereregistered by the biggest Japanese pharmaceuticalcompanies between 1965 and 1983. This was inorder to restrict the focus to US pharmaceuticalcompanies where the trends in the number ofpatents were of a similar nature to those ofJapanese pharmaceutical companies, in order toensure that the US pharmaceutical companies
subject to analysis formed an appropriate control
group.
In total, this forms panel data covering a totalof 20 companies × 19 years = 380 observations.
The explained variable is the number ofsubstance patents. The explanatory variables are
the logarithm for research and development
expenditure, the logarithm for sales ( ln( saleit ) ,and the logarithm for tangible fixed assets (thecross term of the dummy variable for Japanesepharmaceutical companies and the trend term, withthe substance patent dummy as a variable set at 0
for US pharmaceutical companies, and for Japanesepharmaceutical companies prior to 1976, and at 1for Japanese pharmaceutical companies from 1976
onwards) at each company in each year. If this issignificantly positive, it will mean that the
introduction of the substance patent system has
had an impact on the number of patents held byJapanese pharmaceutical companies.
The following can be understood from theseestimated values. Firstly, the coefficient of thelogarithm
forresearch and development
expenditure is 11.6, which is significantly positive.
This demonstrates that if research anddevelopment expenditure increases, the number ofsubstance patents also increases. Moreover, thecoefficient of the cross term for Japanesepharmaceutical companies and the trend is -0.67,
which is significantly positive. When comparedwith US pharmaceutical companies, thisdemonstrates that the degree to which the numberof substance patents held by Japanesepharmaceutical companies increases is small.
Furthermore, the coefficient of the substance●patent dummy is 11.58, which is significantly
positive. This shows that the introduction of thesubstance patent system caused Japanesepharmaceutical companies to increase the numberof substance patents amongst their US patents.
This also suggests that the introduction ofsubstance patent system caused Japanesepharmaceutical companies to increase the numberof their inventions of chemical substances.
Finally, this section discusses the robustnessof the data. In sections 1 and 2, Japanesepharmaceutical companies were taken as thetreatment group and US pharmaceutical companies
as the control group, and a technique called
difference-in-differences was used to examine theimpact of the introduction of the substance patent
system in Japan on the research and development
expenditure and number of patents of Japanesepharmaceutical companies. The objective of using
this technique is to distinguish between the impactof the change in the system and the impact oftechnology shock. However, this technique has the
problem that it is not possible to distinguishbetween changes in research and development
expenditure and the number of patents caused by
the inherent nature of the US pharmaceuticalcompanies used as the control group, andtechnology shock. Accordingly, in this section,
empirical analysis is carried out focused onJapanese pharmaceutical companies alone, without
using US pharmaceutical companies, with theobjective of confirming the robustness of theestimate results. In doing so, it is necessary tocontrol for technology shock, so the total numberof pharmaceutical patents in the US in each year—with the priority date as the reference— is usedas the explanatory variable, as a proxy variable fortechnology shock. Moreover, an additional analysis
was carried out using the trend term as atechnology shock.
From the estimate results, one can ascertainfrom the results of analyzing the impact on
research and development expenditure that thesubstance patent dummy is significantly positive,
and that research and development expenditure by
Japanese pharmaceutical companies is increasing
as a result of the introduction of substance patent
system.
In addition, from the results of analyzing theimpact on the number of substance patents, one
can ascertain that the substance patent dummy issignificantly positive, and that the number ofsubstance patents held by Japanese pharmaceuticalcompanies amongst their US patents is increasing

6 ●IIP Bulletin 2012 Vol.21

as a result of the introduction of the substancepatent system.
The results of the estimates above can besummed up as follows. With regard to the impact of
the introduction of the substance patent system inJapan in 1976 on the research and development
expenditure of Japanese pharmaceutical companies,inbothempirical
analysisusing
difference-in-differences,
in
which
US
pharmaceutical companies were added to Japanesepharmaceutical companies as targets of theanalysis, and empirical analysis in which the focus
was restricted to Japanese pharmaceuticalcompanies, the results showed that the
introduction of substance patent system triggers anincrease in research and development expenditure.
Consequently, one can say that the introduction ofsubstance patent system in Japan in 1976 increased
research and development expenditure by Japanesepharmaceutical companies.
Moreover, with regard to the impact of theintroduction of the substance patent system inJapan in 1976 on the number of substance patents
amongst the US patents registered by Japanesepharmaceutical companies, in both empiricalanalysis using difference-in-differences, in which
US pharmaceutical companies were added toJapanese pharmaceutical companies as targets of
the analysis, and empirical analysis in which thefocus was restricted to Japanese pharmaceuticalcompanies, the results showed that the
introduction of the substance patent system
triggers an increase in the number of substancepatents. Consequently, one can say that the
introduction of the substance patent system inJapan in 1976 increased the number of substancepatents amongst the patents registered in the US
by Japanese pharmaceutical companies.

Ⅵ

Conclusion

This study used financial data and patent dataat the company level to examine in quantitative
terms whether the introduction of the substancepatent system in Japan in 1976 caused an increase
in research and development expenditure andinnovation activities at Japanese pharmaceuticalcompanies.
Firstly, the prospect theory of Edmund Kitch
is behind the hypothesis that research expenditure
increases. As a result of empirical analysis using
two different methods, it was ascertained that anincrease in research and development expenditure
at Japanese pharmaceutical companies was
triggered by the introduction of substance patent●

IIP Bulletin 2012 Vol.21

system in Japan in 1976, so the hypothesis basedon the prospect theory of Edmund Kitch holds truein the case of the pharmaceutical industry in Japanin relation to the introduction of substance patents
in Japan in 1976.
Next, with regard to the analysis of the impact
on innovation at Japanese pharmaceuticalcompanies of the introduction of substance patents
in Japan in 1976, the hypothesis was formed thatthe introduction of substance patent system
encourages the invention of chemical substances,and this was examined using substance patents
amongst patents registered in the US, with theinvention of chemical substances as the proxyvariable. Classical theory relating to intellectual
property rights and innovation lies behind thishypothesis. As a result of empirical analysis using
two different methods, it was ascertained that anincrease in substance patents amongst the US
patents registered by Japanese pharmaceuticalcompanies was triggered by the introduction ofsubstance patent system in Japan in 1976, so the
hypothesis based on the classical theory ofintellectual property rights and innovation holds
true in the case of Japanese pharmaceuticalcompanies in relation to the introduction ofsubstance patent system in Japan in 1976.
The reasons why these hypotheses hold true
can be inferred to be the fact that the introductionof substance patent system was a revision of thepatent system that had a major impact, and the factthat the timing of their introduction was during a
crucial period for the domestic market.
This research has the following two issues.
Firstly, difference-in-differences is used as one ofthe verification techniques. In doing so, US
pharmaceutical companies are used as the control
group, but conversely, this gives rise to the
problem that it is not possible to distinguishbetween changes in technological opportunities
and factors peculiar to US pharmaceuticalcompanies. Consequently, in order to verify therobustness of the findings, empirical analysis
restricted to Japanese pharmaceutical companies
was carried out, but in order to distinguishbetween technological opportunities and factors
peculiar to the control group, a method could
conceivably be used that would involve the additionof pharmaceutical companies in other countries tothe control group, as well as those in the US.
Moreover, US patents were confirmed visually
amongst the patents registered in the US, but itwould seem to be important to carry out this task
systematically, en masse. One would like to makethis a task for the future.
7 ●