Global Innovation Policy Center

An innovative pharmaceutical ecosystem makes possible the discovery of new life-saving medicines that benefit patients around the world.  Policy makers are charged with creating balanced healthcare systems that ensure access to pioneering medicines and lowering the cost of medicines through the availability of generic drugs. The key to stimulating pharmaceutical innovation while facilitating access to lower cost pharmaceuticals is closely connected to the protection and enforcement of intellectual property rights.

The innovative industry is made possible by the protection of intellectual property- specifically patents.  Patents are a key incentive for the pioneer industry to allocate scarce resources in costly and time-consuming research and development (R&D).  Coupled with exclusive marketing rights, patent rights allow pioneers to recoup the costs which average about $1 billion to develop the drug and obtain the marketing approval to provide the medicine to patients.  The mechanisms for implementing an effective patent enforcement system can vary; but the common characteristics of functioning systems include:

• Identification of Relevant Patents: A transparent way to identify relevant patents in force, such as by listing patents that cover pioneer medicines in a central repository that is publically available.
• Notice of the Filing of a Generic Application(s): Timely notice is required to be provided to new drug application holders and/or patent holders when a generic company has started the formal process of securing regulatory approval for its product.
• Early Resolution of Patent Disputes: Enabling patent holders and generic applicants to resolve patent disputes early in the process before significant resources have been expended.

In the United States, a “patent linkage” system created by the Hatch-Waxman Act in 1984 provides a mechanism which encourages the early introduction of generic products without comprising the patent system.  The pioneer retains the ability to enforce patents against an infringer and generics companies the ability to challenge patents to seek early access.  The patent linkage system and the marketing exclusivities provided under the Hatch-Waxman Act have resulted in the United States having the largest and the strongest pharmaceutical industries in the world in terms of innovation and access to generic drugs.

• The U.S. pharmaceutical market is the single largest in the world valued at $340 billion.
• The U.S. FDA approved 661 new drug and biologics applications in the last five years.
• Over half of all new drugs currently under development globally are in the U.S.
• Innovation is on the rise with novel drugs totaling 27% of all new drug approvals.

At the same time, due to the balance achieved by the Hatch-Waxman Act,

• Use of generic drugs in the U.S. market increased from 18% prior to Hatch-Waxman to 86% in 2013.
• FDA approved 2,765 abbreviated new drug applications for generic drugs in the last five years.
• Generics actively used the U.S. patent linkage system to seek early entry in 1/4 of all new drug applications approved since 2000.
• The U.S. generic pharmaceutical market accounts for 45% of the global generic market and is projected to experience double-digit growth rate through 2018.

This paper examines patent enforcement systems and mechanisms adopted by several countries, including the United States, Canada, and South Korea with a particular emphasis on the modern day U.S. patent linkage system and its impact on the innovative pharmaceutical ecosystem.  Countries with effective patent enforcement systems and mechanisms have the foundations in place to support innovative and generic industries.  The paper reviews U.S. history on patent linkage, clear rules of engagement; timely resolution of patent challenges through the court system, and the effectiveness of patent linkage through a review of the data from January 2010 to January 2016.

Click here to download the report.