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Thursday, January 24, 2013

The Role of Patents and Regulatory Exclusivities in Pharmaceutical Innovation

John R. Thomas
Visiting Scholar

In combination, patents and regulatory exclusivities provide the fundamental framework of intellectual property incentives for pharmaceutical innovation in the United States. Patents, which are administered by the United States Patent and Trademark Office (USPTO), provide their owner with the ability to exclude others from practicing the claimed invention for a limited time. In contrast, regulatory exclusivities are administered by the Food and Drug Administration (FDA). Alternatively known as marketing exclusivities, data exclusivities, or data protection, regulatory exclusivities establish a period of time during which the FDA affords an approved drug protection from competing applications for marketing approval.

Although patents and regulatory exclusivities are separate entitlements that are administered by different federal administrative agencies and that depend upon distinct criteria, they both create proprietary rights in pharmaceutical and biologics innovation. These rights allow innovators to receive a return on the expenditure of resources leading to a discovery. Once these proprietary interests expire, the marketplace for that drug is open to generic or follow-on competition.

Congressional interest in promoting both innovation and competition in the pharmaceutical industry has focused attention on both patents and regulatory exclusivities. For example, the 112
th Congress proposed but did not enact the Modernizing Our Drug and Diagnostics Evaluation and Regulatory Network Cures Act, or MODDERN Cures Act (H.R. 3497). This bill confronted policy makers with a debate previously conducted by legal academics over the relative role of patents and regulatory exclusivities in promoting pharmaceutical and biotechnology R&D. In addition, the Obama Administration has proposed a reduction in the regulatory exclusivity offered to brand-name biologic drugs to seven years, down from the 12 years incorporated in the Biologics Price Competition and Innovation Act of 2009 (enacted as Title VII of the Patient Protection and Affordable Care Act). Controversy has surrounded the award of regulatory exclusivities to colchicine, an ancient remedy for gout that was subject to the FDA’s Unapproved Drugs Initiative.

International agreements require each World Trade Organization (WTO) member state to treat all patented inventions in the same manner. This rule seemingly prohibits discrimination both against and in favor of patents on drugs as compared to other technologies. As a result, regulatory exclusivities provide Congress with a more flexible option for stimulating specific sorts of desirable private activity than do patents. The WTO Agreements, as well as certain Free Trade Agreements to which the United States is a signatory, also obligate nations to provide some manner of protection to pharmaceutical test data. Discussion over the inclusion of regulatory exclusivity requirements within the Trans-Pacific Partnership (TPP) is ongoing.

Date of Report: January 7, 2013
Number of Pages: 19
Order Number: R42890
Price: $29.95

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