OVERVIEW:

“The net result is a convoluted and expensive approach to balancing innovation and competition.”

Abstract

A central policy issue in pharmaceuticals is how to balance the dynamic benefits of new drugs against the static benefits of low prices for existing drugs. In the United States, that balance is set by the Hatch-Waxman Act. We review the Act’s origins and key features, then present evidence on its effects on competition and innovation. On the competition side, we show how the Act creates incentives for brands to accumulate patents and generics to challenge them, with the result being a rough stalemate. We also discuss strategies deployed by brands to delay generic entry. On the innovation side, we show that the Act’s patent extension provisions—which aim to allow branded firms to make up for time lost during clinical trials and regulatory review—are incomplete, resulting in potential distortions. The net result is a convoluted and expensive approach to balancing innovation and competition.

About the Contributors.

Bhaven Sampat

Bhaven Sampat is an economist who studies science, technology, and public policy. His current work focuses on three areas: the economics and political economy of the NIH; pharmaceutical patent policy; and the uses of academic research by firms and policymakers. Across these areas, he is interested in how the history of science and technology policy shapes and informs current policy debates.

C. Scott Hemphill

Scott Hemphill teaches and writes about antitrust and intellectual property. His scholarship ranges broadly, from drug patents to digital platforms to the use of trademark law to thwart competition. His most recent work examines the anticompetitive acquisition of startups by dominant firms in the technology sector and probes how institutional investors might weaken competition among their portfolio companies.