Quarterly Report to the Technology Assessment Board, July 1 - September 30, 1981 Page: 30
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Volume IV, Issue 6, August 1981
PUBLICATION BRIEF
M^)cLOO"f Patent-Term Extension
Proposals to extend patent terms for products subject to premarketing regulations
would, if implemented, provide additional incentives for conducting pharmaceutical
research and development. But evidence is insufficient to determine
whether these incentives by themselves would appreciably increase pharmaceutical
innovation.
Patents were intended to promote innovation by providing inventors with the right
to exclude others from making, using, or selling a patented invention. Because drug
developers usually obtain patents before their drugs have been approved by the Food
and Drug Administration, the length of the approval process can directly affect the
length of time during the patent term that a new pharmaceutical is marketed (the effective
patent term).
Drug developers believe that pharmaceutical research is becoming less profitable
as a result of shorter effective patent terms, governmental actions encouraging competition
from drugs generically equivalent to drugs with expired patents, and higher
costs of research.
To date, the profits of the pharmaceutical industry have remained high, revenues
have increased steadily, and R&D expenditures have increased to levels which more
than compensate for the inflation in biomedical research costs. However, the effects
of the decline in effective patent terms and the increased competition resulting from
Government actions may not have been fully felt.
Patent-term extension has numerous implications for society, industry, and innovation.
The extension would increase the attractiveness of research on drugs for large
markets; it would not increase the economic attractiveness of research on drugs for
small markets.
Drugs with extended patent terms would generate additional revenues when the
majority of the proposed extensions are to begin in the 1990's. The long-term stability
of the relationship between R&D expenditures and revenues suggests that increases
in research activities would not occur until that time and that 8 or 9 percent of the additional
revenues generated would be spent on R&D activities. Industry spokesmen
maintain that increased R&D expenditures could be expected sooner because firms
would make their research decisions on the basis of anticipated increases in revenues.
As a result of patent-term extension; the prices of drugs whose patents are extended
would be higher during the extended period than they would have been without
the extension. Consumers would, however, benefit if more and better pharmaceuticals
were developed. It is expected that both the benefits and the additional costs would affect
the elderly and the chronically ill more than other segments of society.
Patent-term extension would delay and in some cases prevent the entry of firms
primarily selling drugs that are generically equivalent to drugs with expired patents.
The revenues of these firms are determined by the remaining market value of drugs
with expired patents-and because of reduced marketing time, the remaining market
values would be reduced.
Copies of the OTA report, "Patent-Term Extension and the Pharmaceutical Industry" are
available from the U.S. Government Printing Office. The GPO stock number is 052-003-00842-4;
the price is $4.25. Copies of the full report for congressional use are available by calling 4-8996.The Office of Technology Assessment (OTA) is an advisory arm of the U.S. Congress whose basic function is to help legislators
anticipate and plan for the positive and negative impacts of technological changes. Address: OTA, U.S. Congress, Washington,
D.C. 20510. Phone: 202/224-0885. (OTA offices are located at 600 Pennsylvania Ave., S.E.) John H. Gibbons, Director.
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Office of Technology Assessment. Quarterly Report to the Technology Assessment Board, July 1 - September 30, 1981, text, 1981; Washington, D.C.. (https://digital.library.unt.edu/ark:/67531/metadc9227/m1/33/: accessed April 18, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.