Study: Longer Drug Exclusivity Hikes Costs, Adds Approvals

(USA.gov)

A new study in the January 2011 issue of the journal Health Affairs (paid subscription required) calculates the financial and social costs of regulations that limit access to pharmaceutical companies’ clinical trial data, used in the manufacture of generic drugs. The study suggests that extending the term of exclusive access for that data would likely lead to higher drug costs in the short term, but also to more than 200 extra drug approvals and to greater life expectancy in the next several decades.

Pharmaceutical companies that introduce new drugs are currently granted five years of exclusive access to the clinical trial data they submit during the approval process. The companies may get an extension of three years if new applications arise and a six month extension is granted if the drug is approved for use in pediatric populations. Generic drug manufacturers, however, have argued for shorter limits so that they can bring less expensive versions of drugs to patients sooner.

The Affordable Care Act of 2010 (Sec. 7002) extends the data exclusivity period for complex therapies called biologics to 12 years. The Health Affairs study — conducted by a team from University of Southern California (USC), University of Chicago, and Precision Health Economics, in Santa Monica, California — investigated the long-term impact of extending the exclusivity period for conventional drugs to the same 12-year period.

The investigators, economists and health-policy experts, found extending the exclusivity period to 12 years would likely increase costs to consumers, and in turn increase revenues for drug manufacturers. They estimated the extended period would add some five percent, on average, to the lifetime revenues of a drug.

Extending the exclusivity period to 12 years, however, would have important long-term benefits to consumers, according to their findings. The researchers project that the extended period would generate 228 more drug approvals. Plus, having these additional drug resources would add 1.7 months to the average life expectancy.

USC economist John Romley, one of the study authors, acknowledges the difficult short-term vs. long-term policy implications of the findings. “Americans in the early 2020s would bear the cost of increasing drug spending,” says Romley. By 2060, however people “could expect increased life expectancy as a result of innovation in the interceding years — that is, new drugs brought to market because of lengthier data exclusivity.”

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