Evolving brand-name and generic drug competition may warrant a revision of the Hatch-Waxman Act

Health Affairs

Volumn 30, Issue 11, 2011, Pages 2157-2166

  Grabowski, Henry G ^a   Kyle, Margaret ^b   Mortimer, Richard ^c   Long, Genia ^c   Kirson, Noam ^c  

^a DUKE UNIVERSITY   (United States)

^b TOULOUSE SCHOOL OF ECONOMICS   (France)

^c ANALYSIS GROUP   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

BIOSIMILAR AGENT; GENERIC DRUG;

ACT; ARTICLE; COST CONTROL; DRUG INDUSTRY; DRUG LEGISLATION; DRUG MANUFACTURE; DRUG MARKETING; ECONOMIC ASPECT; GOVERNMENT; HATCH WAXMAN ACT;

DRUGS, GENERIC; ECONOMIC COMPETITION; LEGISLATION, DRUG; POLICY MAKING; UNITED STATES;

EID: 84855711702     PISSN: 02782715     EISSN: 15445208     Source Type: Journal    
DOI: 10.1377/hlthaff.2010.0270     Document Type: Article

References (35)

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4. Food and Drug Administration, Center for Drug Evaluation and Research. Guidance for industry: 180-day generic drug exclusivity under the Hatch-Waxman Amendments to the Federal Food, Drug, and Cosmetic Act [Internet]. Silver Spring (MD): CDER; 1998 Jun [cited 2011 Oct 3]. (Procedural Guidance 5). Available from: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm079342.pdf
5. For a survey of this literature, see the discussion and references in Grabowski H. Competition between generic and branded drugs. In: Sloan FA, Hsieh CR, editors. Pharmaceutical innovation: incentives, competition, and cost benefit analysis in international perspective. Cambridge: Cambridge University Press; 2007. p. 153-73.
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8. In the case of patent challenges, brand-name firms may employ an "authorized generic" strategy to capture some of the generic sales during the 180-day exclusivity period and moderate their losses. An authorized generic relies on the brandname drug's New Drug Application and is either produced by the brandname manufacturer or licensed by it to another manufacturer. Because it is not approved through an Abbreviated New Drug Application, it is allowed to enter the market during the 180-day exclusivity period. Berndt ER, Mortimer R, Bhattacharjya A, Parece A, Tuttle E. Authorized generic drugs, price competition, and consumer welfare. Health Aff (Millwood). 2007; 26(3):780-99.
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14. Grabowski H, Kyle M. Generic competition and market exclusivity periods in pharmaceuticals. Manage Decis Econ. 2007;28:491-502.
15. We excluded one product from the analysis because generic versions of it were subsequently withdrawn as a result of litigation following their initial entry.
16. New formulations include changes in the form of administration-for example, changing from an injection to a topical application-but not new dosages or new indications.
17. Paragraph IV challenges can be made at the dose or strength level. A generic manufacturer's 180-day exclusivity period applies only to the dose or strength for which that manufacturer was the first to file a Paragraph IV challenge.
18. Padden M, Jenkins T. Hatch-Waxman changes. Natl Law J. 2004;26(25):1-2.
19. This decline from 1995-96 to 2007-08 is not statistically significant, reflecting in part the considerable variation across individual drugs and the small sample size.
20. Average market exclusivity periods were similar whether we analyzed drugs with annual sales greater than $100 million, $250 million, or $1 billion (in 2008 dollars).
21. The 2007 study by Henry Grabowski and Margaret Kyle (see Note 14) reported an average market exclusivity period of 11.5 years for new drugs with first generic entry in 2005 and over $100 million in annual sales (in 2005 dollars)-almost identical to the 11.8 years found in the calculations reported here for 2007-08.
22. Paragraph IV challenge activity is even more aggressive for new drugs with sales greater than $250 million (in 2008 dollars). Of these drugs that experienced first generic entry in 2008, 92 percent also experienced a Paragraph IV challenge, and the average time from launch to first challenge was 7.7 years.
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25. A working paper by Hemphill and Sampat discusses outcomes of Paragraph IV challenges associated with different forms of patent protection. Hemphill CS, Sampat BN. Evergreening, patent challenges, and effective market life in pharmaceuticals. [Internet]. New York (NY): Columbia Law School; 2011 May 3 [cited 2011 Oct 14]. (Columbia Law and Economics Working Paper No. 399). Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1830404#
26. Monthly sales data were not available for drugs experiencing first generic entry prior to 1999.
27. Some legal experts believe that the bar for successfully challenging a patent on obviousness grounds was lowered in 2007 by the Supreme Court's decision in KSR v. Teleflex. Kunin SG, Beverina AK. KSR's effect on patent law. Michigan Law Review: First Impressions. 2007;106:50-54.
28. Generic firms race to be the first filer and gain the 180-day exclusivity. For successful brand-name drugs, the generic first filer can realize several hundred million dollars or more in the immediate years after generic launch. See Note 4.
29. Teva notes that "our revenues and profits are closely tied to our ability to obtain U.S. market exclusivity for generic versions of significant products." Teva Pharmaceutical Industries. Annual report. Petach Tikva (Israel): Teva; 2009. p. 5.
30. The focus here is on investment in innovative research and development, and our point is distinct from Adam Jaffe and Josh Lerner's general argument that there has been a proliferation of patents for trivial or nonexistent innovations. Jaffe AB, Lerner J. Innovation and its discontents: how our broken patent system is endangering innovation and progress, and what to do about it. Princeton (NJ): Princeton University Press; 2004.
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33. Grabowski H, Long G, Mortimer R. Implementation of the biosimilar pathway: economic and policy issues. Seton Hall Law Rev. 2011; 41(2):511-57.
34. An initial analysis of the economic trade-offs involving an adoption of this policy option by Dana Goldman and colleagues found that it would increase drug innovation and societal welfare over the long run but would also have short-run distributional effects. Goldman DP, Lakdawalla DB, Malkin JD, Romley J, Philipson T. The benefits from giving makers of conventional "small-molecule" drugs longer exclusivity over clinical trial data. Health Aff (Millwood). 2011;30(1): 84-90.
35. Higgins MJ, Graham SJ. Intellectual property: balancing innovation and access; patent challenges tip the scales. Science. 2009;326(5951):370-1.