OBJECTIVES: A generic firm’s efforts to challenge the patents of an originator drug have been a controversial issue worldwide. In 1999, the US government amended the patent challenge rule (“paragraph IV certification” process) regarding “180-day market exclusivity award’ for first generic entrants. This study examines how the legislative change, presence of multiple patents, and market incentives have affected a generic firm’s patent challenge incentives over the past two decades. METHODS: Based on the information regarding all new drugs approved over the period 1971-1990, several descriptive analyses were performed. ‘The percentage of all originator drugs that have been challenged’ as well as ‘the speed of challenge’ through paragraph IV certification was presented according to patent expiration year, by the number of the patents filed on the drugs, and by the market size of a drug. Furthermore, a multivariate analysis was conducted to measure the effect of a drug’s market size on a generic firm’s patent challenge incentive. RESULTS: The percentage of originator drugs challenged as well as generic entries through paragraph IV process increases steadily over time, especially after 1999. A large number of patents filed per drug (or longer effective patent life) are associated with an increase of generic entries throughout the patent challenge process. Top-selling drugs are more likely to be challenged through the process than non-top-selling drugs (60.0% vs. 13.0%, Relative Risk 3.01). The lag in challenge is shorter for top-drugs than non-top-drugs (5.5 vs. 6.6 years). CONCLUSIONS: The FDA’s simplification of patent challenge rule in 1999 has made generic firms challenge the originator drug’s patent more frequently. The market size of a drug is the most important patent challenge incentive for a potential generic entrant since the challenge process may involve time-consuming litigations that result in additional entry costs for potential generic entrants.