Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 32

In contrast, market exclusivity pertains to the marketing rights granted by the
FDA upon its approval of the drug, and is conferred on the actual product, inclusive
of its quality, indications, and dosage. The rationale for having FDA-mandated
exclusivity that is separate from the patent protection mechanism stems from the
independence between the patent status and the timing of the FDA approval. As the
development process leading to an FDA approval is long and uncertain, patents can
expire before the drug approval, can be issued after the drug approval, or anywhere
in between. Still, fi rms need assurance that their products will not be reproduced by
competitors soon after the market launch, which can happen if the patents have
expired by the time FDA approval is granted. Market exclusivity is the tool that
provides such assurance. Hence, although market exclusivity does not directly
extend patent life, it prevents competitors from entering the market with the exact
same formulation, quality level, indications, and dosage.
Essentially, both patent protection and market exclusivity are designed to place
the fi rm into what is a temporary monopoly situation so that it can recoup the hefty
costs incurred in drug discovery and development. In the USA, fi rms that manage to
get patent protection and exclusivity rights stacked up in the most favorable way can
obtain a window of protection lasting more than 23 years. The duration of market
exclusivity for new drugs can vary with the type of the drug. For an NCE, the exclu-
sivity horizon is 5 years. If the drug is redesigned for children, additional 6-12
months of pediatric exclusivity can be obtained upon the submission of specifi c
pediatric studies. Orphan drugs (drugs for rare disorders or for diseases that affect a
small percentage of the population) get 7 years of exclusivity. For them, the extended
exclusivity horizon is intended to compensate for the small market. Original bio-
pharmaceuticals can obtain 12 years of exclusive market rights pursuant to the
Patient Protection and Affordable Care Act of 2010.
If the original drug is reformulated for a different indication or for another dos-
age regimen, or if a modifi ed version can demonstrate clinical superiority (e.g.,
greater safety, tolerability, or convenience of administration), an additional 3 years
of exclusivity may be granted. However, this extension is contingent on the approval
of a new application by the FDA, which requires reports on new clinical trials
conducted to investigate the new formulation, indication, or dosage.
The clock on market exclusivity starts ticking at the time of obtaining FDA
approval. In the USA, 74 % of all new drug sales tend to occur in the 5-year exclu-
sivity window following drug approval, with additional 15 % of sales realized in the
3 years following the loss of exclusivity when cheaper generic versions enter the
market (Higgins and Rodriguez 2006 ).

2.2.5 Late Entrants: Me-too and Follow-on Drugs

Despite patent protection and exclusivity, many pioneer, or fi rst-in-class drugs do
not remain the only “game in town” for too long. Even before generic alternatives
enter the market, other branded drugs, also known as me - too and follow - on drugs,