How government policies, patents, and market incentives affect originator and generic pharmaceutical firm behavior towards generic drug entry

Over the past two decades, the US government has made several efforts to encourage generic competition, and maintain the R&D goals for new drugs by giving the pharmaceutical industry members several incentives. This study examines how several factors have affected industry behavior toward generic drug entry, and what the implications of these behaviors are.; Based on the information regarding new drugs with patents that expired in the last two decades, this study investigates: (1) the originator firms' monopoly extension efforts to prevent generic entry, (2) the circumstances in which a generic firm chooses to challenge the patent(s) of an originator drug, and (3) the determinants of generic entry upon patent expiration.; Originator firms attempt to file as many patents (or exclusivities) as possible, especially for their top-selling drugs, with the purpose of prolonging the patent-protected term. A larger number of patents filed per drug (or longer effective patent life) is associated with an increase of generic entries throughout the patent challenge process, which can involve litigations between the firms. The delay in generic entry is due to an extension of the patent protection term, caused by additional patent(s) filed on drugs. The top-selling drugs have attracted a larger number of generic entrants through market forces, leaving drugs with less demand free of generic competition even after monopoly expiration. As a result, consumers have experienced delayed or limited access to generic drugs. Under the influence of the changes on the patent system and generic approval process, both the effective patent life of a drug and generic entry has increased according to year of patent expiration. The increase in the length of patent protection could offset the effect of the generic use encouragement policy.; This study presents evidence of the patent system failure and the presence of loopholes in legislation. It suggests generic competition based solely on willingness of industry has limitations not only to ensure all citizens' access to low-priced drugs, but to contain pharmaceutical expenditures. Therefore, there is a need to be concerned about keeping a balance between innovation and accessibility to benefit society as a whole.