Evergreening, Patent Challenges, and Effective Market Life in Pharmaceuticals

Abstract

Observers worry that generic patent challenges are on the rise and reduce the effective market life of drugs. A related concern is that challenges disproportionately target high-sales drugs, reducing market life for these “blockbusters.”

To study these questions, we examine new data on generic entry over the past decade. We show that challenges are more common for higher sales drugs. We also demonstrate a slight increase in challenges over this period, and a sharper increase for early challenges. Despite this, effective market life is stable across drug sales categories, and has hardly changed over the decade.

To better understand these results, we examine which patents are challenged on each drug, and show that lower quality and later expiring patents disproportionately draw challenges. Overall, this evidence suggests that challenges serve to maintain, not reduce, the historical baseline of effective market life, thereby limiting the effectiveness of “evergreening” by branded firms.

Keywords: Drugs, FDA, Innovation, Patents, Pharmaceuticals, R&D, Hatch-Waxman