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Pharmaceutical Patents and Generic Entry Competition: A New View on the Hatch-Waxman Act

Author

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  • MIYAGIWA, Kaz
  • WAN, Jiangyun(Yunyun)

Abstract

We present a formal analysis that sheds new light on the Hatch-Waxman Act. Hatch-Waxman restores incentives to develop new drugs by extending the patent life for them, but also promotes generic entry by reducing entry costs and by providing 180-day marketing exclusivity to a first challenger to the patent. Although these two objectives appear incompatible, our model shows that marketing exclusivity, with a significant entry cost reduction, contributes to incentive restoration. It finds however that social welfare is lower with marketing exclusivity. Finally, our analysis suggests that marketing exclusivity not be granted in the case of drugs for rare diseases.

Suggested Citation

  • MIYAGIWA, Kaz & WAN, Jiangyun(Yunyun), 2016. "Pharmaceutical Patents and Generic Entry Competition: A New View on the Hatch-Waxman Act," IIR Working Paper 15-18, Institute of Innovation Research, Hitotsubashi University.
    • Handle: RePEc:hit:iirwps:15-18
    Note: Revised on July 11, 2016
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    pharmaceutical innovation and patents; generic entry competition; Hatch-Waxman; marketing exclusivity;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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