Paper Promises for Drug Innovation

Innovation does not stop when a new medicine is launched. Development of new uses for already approved drugs, in particular, can make profound contributions to the public health. Whether a new use is suspected during the initial premarket trials, identified through focused research after approval, or discovered serendipitously by physicians treating patients, however, it requires extensive clinical testing before it can be approved by FDA. This testing takes time and money — three to five years on average, and as much as $300 million. This Article considers the incentives that federal law offers to companies to make this investment: patent protection and regulatory exclusivity. Both are designed to provide the innovator with a temporary period of exclusive sales for the use in question. In theory, a generic should be dispensed for all other uses, but the innovator should enjoy all sales for the new use. In fact, though, the sales are not excludable; the incentives are nothing more than paper promises. Generic companies generally enjoy the new-use sales as well. This is flatly inconsistent with the goal of the federal laws governing new-use patents and new-use regulatory exclusivity, and it needs to stop. It happens because we have acquiesced to FDA practices and policies, state laws and policies, and healthcare professional and payer behaviors that work together to gut the incentives put in place by Congress. This Article considers ways of reforming practices at the agency and elsewhere in the healthcare system, so that we can have prompt approval of lower cost generic drugs when patents and exclusivity on a brand drug’s underlying compound and initial use expire, and automatic substitution of those generics when the brand drug is prescribed for the initial use, without the gutting of incentives enacted by Congress.