Using Market-Exclusivity Incentives to Promote Pharmaceutical Innovation

While demand for innovative pharmaceutical therapies is on the rise, the number of new drugs reaching market has declined to an average of 22.6 drugs and biologics per year (2005–2009) compared with 37.2 a decade previously (1995-1999).

Pharmaceutical development requires costly up-front investments in years of research and development (R&D) and clinical trials. Drug companies in return are given market exclusivity to sell their patent-protected products for a period of time and at prices above the cost of production.

This author critically reviews five key pieces of legislation that employed market exclusivity incentives to promote pharmaceutical R&D:

  1. Patent and Trademark Act Amendments (Bayh-Doyle, 1980)
  2. Orphan Drug Act (1983)
  3. Drug Price Competition and Patent Term Restoration Act (Waxman-Hatch, 1984)
  4. Prescription Drug User Fee Act (1992)
  5. FDA Modernization Act (pediatric exclusivity, 1997)

As a result of his study, the author concludes that the impact and cost-effectiveness of these programs remain controversial and not well documented; market exclusivity can lead to abuse of incentives and improper financial gains; and exclusivity and accelerated FDA reviews can have unintended consequences, such as the approval of more drugs found later to have safety issues.

Kesselheim suggests that future legislation to encourage investment in drug R&D be more precisely designed and linked to demonstration of positive public health outcomes.