Pharmaceutical patents and generic entry competition: the role of marketing exclusivity

Kaz Miyagiwa and Yunyun Wan

No 2015-05, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: Extensive tests required by FDA severely curtail effective patent length for innovation drugs, raising concern that incentives to develop new drugs are insufficient in the U.S. The Hatch-Waxman Act addresses this issue with a five-year patent extension. At the same time, Hatch-Waxman promotes generic entry by reducing the entry cost for generics and by granting 180-day marketing exclusivity to a first challenger of the patent. While these two objectives seem at odds with other, we show that if the entry cost reduction is substantial, granting the marketing exclusivity also contributes to restoration of incentives to innovate. However, market exclusivity most likely decreases social welfare.

Keywords: innovation; generic entry competition; patent; pharmaceuticals (search for similar items in EconPapers)
JEL-codes: I18 K23 L13 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2015-08-21
New Economics Papers: this item is included in nep-com, nep-hea, nep-ino, nep-ipr and nep-pr~
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