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Pharmaceutical patents and generic entry competition: the role of marketing exclusivity

Listed author(s):
  • MIYAGIWA, Kaz
  • WAN, Yunyun
Registered author(s):

    Extensive tests required by FDA severely curtail effective patent length for innovation drugs, raising concern that incentives to develop new drugs are insufficient in the U.S. The Hatch-Waxman Act addresses this issue with a five-year patent extension. At the same time, Hatch-Waxman promotes generic entry by reducing the entry cost for generics and by granting 180-day marketing exclusivity to a first challenger of the patent. While these two objectives seem at odds with other, we show that if the entry cost reduction is substantial, granting the marketing exclusivity also contributes to restoration of incentives to innovate. However, market exclusivity most likely decreases social welfare.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/27421/1/070_hiasDP15-05.pdf
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    Paper provided by Hitotsubashi Institute for Advanced Study, Hitotsubashi University in its series Discussion paper series with number 2015-05.

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    Length: 29 p.
    Date of creation: 21 Aug 2015
    Handle: RePEc:hit:hiasdp:2015-05
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    1. Choi, J.P., 1997. "Patent Litigation as an Information Transmission Mechanism," Discussion Paper 1997-17, Tilburg University, Center for Economic Research.
    2. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
    3. Toshiaki Iizuka, 2012. "Physician Agency and Adoption of Generic Pharmaceuticals," American Economic Review, American Economic Association, vol. 102(6), pages 2826-2858, October.
    4. Richard G. Frank & David S. Salkever, 1995. "Generic Entry and the Pricing of Pharmaceuticals," NBER Working Papers 5306, National Bureau of Economic Research, Inc.
    5. Panattoni, Laura E., 2011. "The effect of Paragraph IV decisions and generic entry before patent expiration on brand pharmaceutical firms," Journal of Health Economics, Elsevier, vol. 30(1), pages 126-145, January.
    6. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 10(2), pages 107-142, July.
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