New Drug Application impact on patent and exclusivity

Patents are granted to stimulate creativity and innovation among competing drug manufacturers. They are not easy to come by and so innovators who target new areas of health are rewarded with enough time to recoup the typically high costs incurred during the research and development phase, writes Dr Nicola Davies in her exclusive monthly FDA Blog for The Pharma Letter.

Patient advocates heavily criticize patented drugs for issues around overpricing and controlled access. However, patents don’t last forever. Once granted, a patent typically lasts two decades, which should be enough time to realize a return in the company’s innovation costs.

Patent expiration implies billions of dollars lost in revenue. It is estimated that up to 90% of a brand product’s sales are siphoned off by generic versions. AstraZeneca (LSE: AZN) has two branded products whose patents expire this year, that together represent $7.34 billion in annual sales for the company (Renoe, 2015).

Many expired patents have spawned a range of biosimilars and generics. Although the patent expiration can be commercially disheartening for patent owners, it is a boon for patients. On average, the costs of generic versions are 80 to 85% lower than patented versions (Renoe, 2015).