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Proprietary Rights in Pharmaceutical Innovation: Issues at the Intersection of Patents and Marketing Exclusivities

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Abstract:

In combination, patents and marketing exclusivities provide the fundamental framework of intellectual property incentives for pharmaceutical innovation in the United States. Patents, which are administered by the United States Patent and Trademark Office (USPTO), provide their owner with the ability to exclude others from practicing the claimed invention for a limited time. In contrast, marketing exclusivities are administered by the Food and Drug Administration (FDA). Alternatively known as "data exclusivity" or "data protection," a marketing exclusivity prevents generic competitors from referencing the preclinical and clinical test data that manufacturers of brand-name pharmaceuticals generated in order to demonstrate the safety and effectiveness of their products. The FDA currently awards qualifying innovators with marketing exclusivities for the development of new chemical entities or orphan drugs, as well as for the performance of new clinical studies and pediatric studies.

Although patents and marketing exclusivities are separate entitlements that are administered by different federal administrative agencies and that depend upon distinct criteria, they both create proprietary rights in pharmaceutical innovation. These rights in turn allow innovators to receive a return on the expenditure of resources leading to the discovery. Once these rights expire, the marketplace for that drug is open to generic competition.

Several innovation policy issues have arisen concerning the relationship of patents and marketing exclusivities. Some observers believe that marketing exclusivities are unnecessary because patents are generally available for pharmaceutical innovation. On the other hand, some observers believe that the terms of the marketing exclusivities established by U.S. law are too short. In particular, they note that comparable European standards are often considerably longer than their U.S. counterparts.

International agreements require each World Trade Organization (WTO) member state to treat all patented inventions in the same manner. As a result, marketing exclusivities provide Congress with a more flexible option for stimulating specific sorts of desirable private activity than do patents. Indeed, the 109th Congress is currently considering expanding upon existing marketing exclusivities in order to encourage the development of bioterrorism countermeasures. WTO Agreements, as well as recent Free Trade Agreements to which the United States is a signatory, also oblige nations to provide some manner of protection to pharmaceutical test data.

Although general patent reform legislation has been the subject of significant discussion during the 109th Congress, current legislative proposals do not appear particularly to impact the relationship between patents and marketing exclusivities. Some maintain that continued attention to the impact of broadly oriented patent reforms upon the pharmaceutical industry is appropriate.