Wednesday, September 15, 2010
Posted by D. Daniel Sokol
C. Scott Hemphill, Columbia University - Law School and Bhaven N. Sampat, Columbia University - Mailman School of Public Health ask When Do Generics Challenge Drug Patents?
The Hatch-Waxman Act regulates competition between brand-name and generic drugs in the United States. We examine a feature of the Act that has generated significant controversy, yet received little systematic attention. “Paragraph IV” challenges are a mechanism for generic drug makers to challenge the patents of brand-name drug makers as a means to secure early market entry.
We begin with a set of descriptive results about brand-name patent portfolios and Paragraph IV challenges. Over time, patenting has increased, measured by the number of patents per drug and the length of the nominal patent term. During the same period, the fraction of drugs receiving challenges has increased. Drugs are also challenged sooner, relative to brand-name approval.
Our econometric analyses of challenges over the past decade show that brand-name sales have a positive effect upon the likelihood of generic challenge, consistent with the view that patents that later prove to be valuable receive greater ex post scrutiny. The likelihood of challenge also varies by patent type and timing of expiration. Conditional on sales and other drug characteristics, drugs with weaker patents, particularly those that expire later than a drug’s basic compound patent, face a significantly higher likelihood of challenge. Though the welfare implications of Hatch-Waxman patent challenge provisions are complex, our results suggest these challenges serve a useful purpose by promoting scrutiny of low quality and late-expiring patents.