How Patent Protection Impacts The Price Of Drugs


Americans struggling to pay for brand name drugs were saved by the introduction of generics throughout the years. However, despite being thankful for these savings, it’s often unclear how such a price disparity exists between a branded drug and its generic counterpart.

The resource featured alongside this post attempts to clear up said disparity. Of the information listed, one of the most important factors is the duration of the patent process. Patenting a drug is a complicated and expensive process that is often dragged out to the point of failure. Companies spend billions of dollars researching drugs to develop, but rarely will these drugs ever grace pharmacy shelves. Those that do require patent protection, which gives these companies the ability to charge such high prices. These prices are meant to help these organizations regain the money they invested in developing these drugs. Of course without the advancements made in some of this research, Americans would be much worse off despite these outrageous prices.

The United States Government would come to realize this as well, though. Which is why in 1984, the passing of the Hatch-Waxman Act allowed for generic drugs to compete with their brand name counterparts after a specified duration of time. This act allowed for generics to disregard the pre-clinical and clinical trials branded drugs had to go through in order to be sold. Eliminating these expensive and time-consuming trials allowed for generics to enter the market at a much more accelerated rate, at a much cheaper price than branded drugs.

As the resource mentions, it’s imperative to understand the distinction between generic drugs. There are two types: generics and authorized generics.

Authorized generic drugs are drugs manufactured by the company that makes the branded drug. In some rare instances, these can also be generics manufactured by another organization with express permission from the original manufacturer. These drugs are then marketed as generics.

Non-authorized generics are drugs manufactured by organizations other than the original manufacturer. The major difference between these generics comes in the form of quality control and availability. Unfortunately, authorized generics are known to have better quality control compared to non-authorized generics. This can be an important consideration for someone who has to use any drug for the long-term.

Generic availability is also quite variable. Some consumers may take branded drugs that don’t offer have a generic counterpart. Namely because developing these generics takes such a long time, they could be waiting for years before a generic is available to them. With patents being awarded for 20 years, and some drug companies doing everything in their power to maintain exclusive market rights for even longer, generics are left to fight an uphill battle. However, law in the United States allows for developers of the generic to challenge these drug patents. A successful challenge of these patents allows for the generics to enter the market much faster.

For more information regarding the patent process for branded drugs and generic drugs, be sure to review the infographic coupled alongside this post. Courtesy of Rubin Anders