Data: Hemphill and Sampat's dataset consists of the 125 new molecular entities (NMEs) subject to competition from therapeutically equivalent generics between 2001 and 2010. Effective market life was measured from branded approval to generic approval (average: 12.2 years). For each branded drug, they collected data on sales in the year prior to generic approval (average: $610 million; top-seller: Prilosec, $5 billion). They also coded all patents that have been listed in the Orange Book for each branded drug (average of 2.9 patents/drug, which were themselves coded based on whether they contained an active ingredient claim). Finally, the authors determined whether the generic's application had a Paragraph IV patent challenge, and they coded which patents were actually challenged (78 out of 125 NMEs had patent challenges, only 27 of which targeted an active ingredient patent).
Results: The results of Hemphill and Sampat's paper are short and clearly presented, so their paper is definitely worth downloading if you are interested in this topic. But here are a few highlights:
- Nominal patent term increases with sales, but market life is not statistically correlated with sales or with nominal patent term.
- Drugs with patent challenges have shorter market life, but patent challenges are not randomly distributed: drugs with longer nominal patent terms are more likely to be challenged. So overall, drugs that draw patent challenges have similar effective market life to other drugs.
- Patent challenges focus on non-active-ingredient patents; active-ingredient patents are 32% less likely to be challenged.
- Generics are more likely to challenge drugs with high sales, and are more likely to target active-ingredient patents for those drugs. But these challenges are harder to win: there is no significant correlation between whether an active-ingredient patent is challenged and market life.
Conclusion: The authors note that the effective market life for drugs has remained around 12 years over the past decade, which is "not much different than in the previous decade, and greater than in the decade before Hatch-Waxman." They summarize their results as follows:
Taken together, our results show that challenges are playing a restorative role, ratcheting back the effective market life of drugs with large nominal patent terms to about 12 years. They are particularly likely for large sales drugs, as critics of these challenges warn. However, this appears to reflect that 'evergreening' is also particularly likely for these drugs. While previous scholarship has portrayed challenges as reflecting generic aggressiveness, our results suggest that the prevalence of challenges also reflects the extent of evergreening.They note that they "do not attempt to determine the optimal patent term for pharmaceuticals," but "[e]ven if the theoretically optimal market life is greater than 12 years," they "are skeptical that asserting patents of doubtful validity or scope is the right way to achieve this." Rather, it might make sense to have a longer data exclusivity period that provides more certainty and "serve[s] an an upper as well as lower bound" to protection.