Innovation is pivotal for the pharmaceutical industry’s growth and development. The success of research and development (R&D) of any pharma company depends on product innovation. There are a number of drugs approved annually by the USFDA that have fallen due to patent challenges i.e. increasing stifling in new drug development and innovation. The US patent system has been criticized several times in relation to access of medications.

Patents are widely used by the pharmaceutical companies to prevent others from manufacturing or selling for a time period of 20 years and help in spurring drug innovation. There is also a correlation between industry revenues and R&D as industry revenues support R&D and patent support revenues. The average R&D cost of a new drug launched in the market has been increasing since 2000 as many drug companies are making investments in R&D without any certainty about the outcome.

Majority of the pharmaceutical companies rely on patent-related revenues to recoup investments incurred in R&D. As R&D expenditures are skyrocketing, pharma companies are facing numerous challenges in terms of market exclusivity and competition. Although FDA provides a time period for data exclusivity during which generic versions of the drugs are not marketed and adequate patentability ensures extension of data exclusivity period and prevent others from developing the drug. However, companies producing generic drugs can challenge patentability and compete with branded drugs after four years. In order to market the drug, the generic drug manufacturer has to file an Abbreviated New Drug Application (ANDA) with the FDA specifying how it is related to branded drugs and its patents.

The generic drugs manufacturer needs to challenge each patent related to the branded drugs mentioning that the patent is invalid and ANDA doesn’t infringe the patent. However, the ANDA approvals relating to patent challenges takes three years during which no other company can enter the market. It provides an incentive to the patent challenger to reap rewards and dividends by pricing the drug a notch below the branded drugs.

In the past decade, national governments have tried to resolve the conflicts and framed policies relating to patent challenges. Most of the issues pertain to ensuring timely access to affordable drugs, allowing expedited approvals from FDA and restoring patent protection terms that is lost during FDA approval process. But the focus on innovation is tipping away as the launch of generic drugs results in huge losses to the company and sales in branded drugs. The loss also exceeds companies from extending patent protection term awarded to the pharma companies. These challenges lead to decline in pharma companies’ revenues and profits, thus affecting the R&D pipelines.

The cost of challenging a patent is relatively small as compared to huge pay off. Generic manufacturing companies are prospering by filing numerous ANDA’s. In order to be successful, they need to win a fraction of these patents and generate revenues. There have been many cases under federal trade commission resulting in litigation with generic drug manufacturers wining more than 42 per cent of the cases. Furthermore, the changes in the patent law have made it easier to launch and win the patent-related challenges.

 The patent challenges are spiraling since 2006-07 and have been on an upward swing. Most of the changes have been due to regulatory changes that have been made in the past decade and have resulted in drugs losing data exclusivity and patent challenges filed by generic drugs companies. At times, the blockbuster drugs are challenged but changes in the patent law have also posed challenges against drugs making below US$ 120 million in revenues.

 The timing and type of drugs to be launched in market can affect the sales and revenues of the drugs introduced in the market. On the other hand, pharma companies are also responding to patent challenges by introducing new drugs. However, these drugs are reformulation or next generation products having marginal improvisation as compared to newly launched drugs with newly formulated introductions. These products are being marketed to masses with slight improvements over previously marketed drugs.

Several pharma companies are facing patent challenges with competitors selling generic drugs before the patent period expires. As a result, the sales of branded drugs are plummeting with a risk over US$100 billion in sales. These challenges are mostly in case of branded drugs, thus shortening patent life of a particular drug. In order to increase the life of effective patents the governments has to intervene and make policies so that the pharma companies can recoup the R&D expenditure. Additionally, the policymakers and lawmakers should find an alternative to data exclusivity as the time period is insufficient to recoup the R&D costs. There has been debate for the doubling the time period for data exclusivity especially with respect to biologic drugs.

Thus, a robust system should be built keeping in the mind the market innovations and financial incentives. The qualities of the patent challenge benefits the society and discourage branded drug manufacturers from obtaining patents that are unlikely to be judged valid and infringed.

The generic firms are provided three months exclusivity in order to challenge weak patents and enter the market, thus benefiting consumers with lower prices of drugs. However, it is a tool considered to encourage weak challenges to patents in wake of prompting settlement and enabling generic firms to make stronger patent challenges.
 In developed and developing countries policy-makers have to weed out low quality patents and provide financial incentives for generic drug manufacturers to identify and challenge that are improperly issued by USPTO. With the proliferation of patents and expansion of patent terms the time period provided to generic manufacturers has been stable.

Patent challenges often lead to uncertainty about the returns on research and development and discourages further investment in R&D for drug companies. The benefits or incentives incurred from successful R&D should be high in order to promote investments in R&D and provide huge returns to inventors. However, some concerns have been raised related to market exclusivity periods after taking into account patent restoration periods that it provides adequate incentives for corporates to make risky investments in therapies such as oncology. Therefore, the government should extend the market exclusivity periods in order to encourage innovation and increase R&D investments. The big question is how research and development will balance the incentives for short term and long term benefits.

To conclude, the current environment presents enormous challenges such as economic, regulatory, and political for the research-intensive pharmaceutical industry. In simple terms, these challenges along with the time, cost and risk related to the development of drug and boosting the output, create a roadblock for pharmaceutical companies. To ensure the viability and economic success of the pharma industry along with development of life-savings drugs, the government should create an innovation network and remove challenges in the innovation landscape.