Determinants of Market Exclusivity for Prescription Drugs in the United States
The high prices of brand-name prescription drugs are a growing source of controversy in the United States. Manufacturers of brand-name drugs can command high prices because they are protected from generic competition by two types of government-granted monopoly rights. The first are patents on the drugs that generally define the basic period of brand-name-only sales. The second is awarded at the time of US Food and Drug Administration (FDA) approval and usually defines the minimum time until a generic can be sold. The initial patents last for 20 years and may be extended to account for time spent in clinical trials and regulatory review; other laws prevent approval of other manufacturers’ versions of new drugs for about 6 to 7 years, and for new biologics for 12 years. Overall, most new drugs receive about 12 to 16 years of market exclusivity from both kinds of monopoly protection combined. We reviewed the peer-reviewed medical and health policy literature to identify studies that described the different types of patent protection and regulatory exclusivities that shield brand-name prescription drugs from competition and thus help to sustain high drug prices. We also identified potential policy reforms intended to modify exclusivity periods to address public health needs by balancing drug affordability and industry revenue. The goal of policy in this area should be to ensure that drug market exclusivity periods provide for fair return on investment but do not indefinitely block availability of lower-cost generic drugs.