Longer patents for increased generic competition in the US. The Waxman-Hatch Act after one decade.

Abstract

The 1984 Waxman-Hatch Act had two main objectives. Title I was designed to promote price competition by establishing an abbreviated new drug application (ANDA) process for generic market entry. Title II was designed to encourage drug innovation by restoring some of the patent life lost during the lengthy FDA regulatory process. In this paper, we consider whether these twin objectives have been realised during the first decade of the Act's existence. First, we investigate the pattern of generic and brand name prices and market shares for the major products whose patents expired between 1984 and 1993. A regression model indicates that generic competition has been intensifying significantly in recent periods. Major brand name products now typically lose more than half their market share within the first year after patent expiration. In addition, we examine changes in patent protection for new chemical entities introduced over the period 1984 to 1993. For 1991 to 1993 new drug introductions, the average effective patent life was 11.8 years with 2.3 years resulting from Waxman-Hatch extensions. In the final section of the paper, we consider how the US law compares with that in Europe and discuss possible legislative improvements in the 1984 Act.