The Myth of Generic Pharmaceutical Competition Under the Hatch‐Waxman Act

Abstract

Without a doubt, health care costs are on the rise, and how to reduce those costs is of great concern to many. The Hatch-Waxman Act attempts to reduce pharmaceutical costs by encouraging market entry by lower-priced generic pharmaceuticals and without a doubt has been successful in doing so over the last three decades. The question is, at what price? Although designed to balance greater generic market entry with stronger incentives for brand-name pharmaceutical innovators to continue developing new drugs, the Act appears to have fall short of making those incentives nearly strong enough and, indeed, likely weakens them. Perhaps more importantly, however, a closer look at basic beliefs animating the Hatch-Waxman Act suggests that they are simply off the mark. The Act focuses far too much on competition and on removing barriers to market entry and as a result neglects the bigger context of the pharmaceutical market. The pharmaceutical market is not a competitive market for a variety of reasons, and one may doubt whether we should want it to be one. In any event, the Hatch-Waxman Act’s simple focus on generic regulatory burdens and pharmaceutical patents does little or nothing to foster any meaningful, long-term competition and has in the meantime likely weakened the ability of brand-name pharmaceutical innovators to continue to develop new pharmaceuticals. We may therefore wish to reconsider the wisdom of maintaining the Act in its current form, if at all.

Keywords: Hatch-Waxman, Patents, Pharmaceutical Patents