The Drug Innovation Paradox

Abstract

In medicine today, we face an innovation paradox. The companies that develop new medicines are highly dependent on a period of exclusive marketing after approval, to fund their research and development programs. But longer research and development programs are not associated with longer periods of exclusive marketing. Instead the period of exclusive marketing may be shorter. Exclusivity that dwindles with each additional month of pre-commercialization research should lead innovators to be more efficient, but this Article explores a concern that the added factor of the drug regulatory system leads to a different result.

This Article contributes to the literature on incentives for pharmaceutical innovation as follows. First, it explains the theory of new drug approval and uses historical scientific and regulatory materials to illustrate that the premarket paradigm at any given time depends heavily on the state of clinical trial and statistical methodology and clinical pharmacology, as well as the prevailing regulatory climate. The length of any particular program is a function of the molecule and chemical class, disease and disease stage, and outcome that a firm tests, as well as scientific obstacles and opportunities that present themselves. Second, it presents empirical findings about the length of premarket programs from 1984 to 2016 using a dataset of regulatory milestones made public through FDA’s implementation of the patent term restoration provisions of the 1984 statute. This is the first piece of scholarship to combine these data with the listed patents on those drugs, the initial labeling approved by FDA for those drugs, and their therapeutic categorizations, and the first to use these data to offer comprehensive descriptive statistics about the relationship between drug types and premarket timelines.

The findings have significant implications for innovation policy. The paradox in drug innovation is that we have chosen to incentivize research and development with a post–market award, but as the research and development timeline increases, the post–market reward for the innovation remains the same or decreases. If the length of the premarket process correlates with particular drug types, disease targets, or studied outcomes, we may be offering an inadequate incentive in entire areas of medicine where we have a critical need for new treatments.

Keywords: new drugs, patents, data exclusivity, clinical trials, medical innovation, health policy, empirical research, history of medicine, patent policy, patent term restoration