The Value of Patent Term Extensions to the Pharmaceutical Industry in the USA

Abstract

In the last 20 or so years various kinds of exclusivity have been introduced in the US, which go beyond the basic patent protection. The most important of these is patent term restoration, but other new incentives introduced include the paediatric extension, exclusivity for drugs with limited patient populations (orphan drugs) and data exclusivity. Since 1988 over 500 products have benefited from patent term restoration and over 130 from the paediatric extension. Of the 40 best selling products in the US in 2006, 26 benefited from patent term restoration and 19 from the paediatric extension, with 29 products benefiting from one or both. The overall impact on these 29 was to increase average effective patent life from 9.2 to 12.8 years, an increase of over three and a half years. About 39 per cent of the top 40 sales of over US$100bn were contributed by patent extensions. It is estimated that patent extensions could account for about 20 per cent of total US pharmaceutical sales in 2006. Although patent term extensions are currently a sizeable contributor to the gross sales revenues of pharmaceutical companies, the evidence suggests that this contribution will fall significantly in the future, principally as a result of the decline in the number of new chemical entities receiving marketing authorisation. The evidence suggests that the US legislation has been more successful in incentivising the generic market, and that while research-based manufacturers have benefited from patent term extensions, these have not prevented the difficulties they now face which derive from more fundamental economic and technological challenges.