IP Explained: How Hatch-Waxman successfully balances affordability and innovation

For three decades, The Drug Price Competition and Patent Term Restoration Act, more commonly known as the Hatch-Waxman Act, has fostered innovation, spurred competition and helped the United States remain a leader in biopharmaceutical research and development (R&D). In today’s IP Explained, we’re taking a look at how Hatch-Waxman successfully streamlined the process for generic medicine approvals while preserving incentives for innovation.

The development of new medicines is a lengthy, complex, uncertain and expensive process. In fact, from drug discovery through FDA approval, developing a new medicine takes 10 to 15 years and costs an average of $2.6 billion. In order to balance innovation and affordability, Congress enacted the Hatch-Waxman Act, which provides biopharmaceutical companies with time and incentives to develop safe and effective medicines and generate revenues to put back into future R&D. Under the framework, innovator companies are given a 5-year exclusivity period for new chemical entities during which generic manufactures generally cannot submit FDA applications for new generic versions. Hatch-Waxman also allows for innovators to seek to restore some of the patent term lost due to the FDA approval process.

In addition to fostering biopharmaceutical innovation, Hatch-Waxman increases competition and affordability by creating an abbreviated regulatory approval path for generic products. Abbreviated new drug applications, commonly referred to as ANDAs, allow generic manufacturers to reference the brand manufacturer’s clinical data instead of having to fund their own trials. A defined patent litigation framework and 180-day exclusivity period incentivize generic manufacturers to challenge patents in federal court and improve patient access to generics. Under the framework, generic manufacturers are also protected by a “safe harbor” provision that exempts them from patent infringement liability for development work before the brand drug patent expires.

Prior to the enactment of Hatch-Waxman, only 19 percent of U.S. prescriptions were filled with generics and it took, on average, 3 to 5 years after patent expirations for a generic to enter the market. Since then, the generic pharmaceutical industry has seen enormous growth, and nearly 90 percent of prescriptions are now filled with generics. With this increase in brand and generic competition, Hatch-Waxman created $1.67 trillion in savings from 2007 to 2016.

The Hatch-Waxman Act has successfully balanced innovation and affordability by promoting competition and ensuring the United States continues to deliver life-saving treatments to patients. Strong patent protections give researchers the ability to continue investing in the R&D for new, cutting-edge medicines and approaches that can save and improve millions of lives. We must ensure the U.S. patent system continues to protect these inventions while also incentivizing competition.

Learn more about intellectual property on our IP page and check back for next week’s IP Explained blog.