Because intellectual property (IP) rights, including patent rights and regulatory exclusivities, play an important role in the development and pricing of pharmaceutical products, a key focus of this debate is whether existing IP law promptly balances the need for innovation with the costs that IP may impose on the public. New pharmaceutical products generally benefit from two main forms of IP protection: patent rights and regulatory exclusivities. Patents, which are available to a wide variety of technologies beyond pharmaceuticals, are granted by the U.S. Patent and Trademark Office (PTO) to inventions that are new, useful, nonobvious, and directed at patentable subject matter. The holder of a valid patent generally has the exclusive right to make, use, sell, or import a patented invention within the United States for a period beginning when the patent is issued by the PTO and ending 20 years after the date of the patent application. The Food and Drug Administration (FDA) grants regulatory exclusivities upon the completion of the FDA regulatory process necessary to market pharmaceutical products (i.e., drugs and biological products). Exclusivities are granted only to certain pharmaceutical products such as innovative products (e.g., a new active ingredient or new indication for an existing drug) or those that serve a specific need (e.g., treating rare diseases). Regulatory exclusivities prevent FDA from accepting or approving an application by a competitor for FDA approval of a follow-on product (i.e., a generic or biosimilar version) of a previously approved pharmaceutical for a set time period, and/or preclude a competitor from relying on safety and efficacy data submitted by the original manufacturer for a period of time. Depending on the type of pharmaceutical product at issue and other factors, regulatory exclusivities may last anywhere from six months to 12 years. Given that IP rights may allow the rights holder to charge higher-than-competitive prices, and can deter or delay the market entry of generic drug or biosimilar competitors, changes to IP rights or otherwise facilitating competition is seen by some to offer a potential means of lowering prices for pharmaceutical products. Specifically, provisions of the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act) govern FDA approval and patent disputes for generic drugs, whereas the Biologics Price Competition and Innovation Act of 2009 (BPCIA) governs FDA licensure and patent disputes for biosimilars. Second, it overviews FDA requirements for obtaining approval to market a drug or biological product, the abbreviated pathways for generic drug approval under the Hatch-Waxman Act and biosimilar licensure under the BPCIA, and different regulatory exclusivities that FDA grants to certain types of approved pharmaceutical products. In the pharmaceutical context, patents claiming a drug product or medical device (or a method of using or manufacturing the same) may be extended for up to five years to account for delays in obtaining regulatory approval, if certain statutory conditions are met. In some circumstances, patent rights can affect when a follow-on generic or a biosimilar can be marketed. For example, if a court hearing a patent dispute grants an injunction against a generic drug manufacturer that prohibits that manufacturer from infringing by making the generic drug, that product cannot be brought to market until after the patent expires. Patent rights may also affect follow-on market entry indirectly , if a generic or biosimilar manufacturer declines to seek FDA approval because of the number of existing patents relating to a product or the costs of challenging them. Paragraph (I) and (II) certifications do not affect FDA's ability to approve the ANDA. Reforming Pay-for-Delay Settlements: The Preserve Access to Affordable Generics and Biosimilars Act

As described above, patent litigation can result when generic drug and biosimilar manufacturers seek to market a drug or biological product before patent rights expire by challenging the validity of the brand-name companies' patents and/or their applicability to the follow-on product. The Preserve Access to Affordable Generics and Biosimilars Act (PAAGBA) seeks to limit the ability of drug and biological product manufacturers (i.e., brand-name companies) to pay generic or biosimilar manufacturers to delay their entry into the market. If the Secretary determines that the price of a brand-name drug is excessive, the Secretary would be authorized to (1) "waive or void any government-granted exclusivities" with respect to such drug, and (2) issue "open, non-exclusive [compulsory] licenses" that allow competitors to "make, use, offer to sell or sell, and import [the brand-name drug] and to rely upon the regulatory test data" of the brand-name drug manufacturer.
Intellectual property (IP) rights play an important role in the development and pricing of pharmaceutical products such as prescription drugs and biologics. In order to encourage innovation, IP law grants the rights holder a temporary monopoly on a particular invention or product, potentially enabling him to charge higher-than-competitive prices. IP rights, if sufficiently limited, are typically justified as necessary to allow pharmaceutical manufacturers the ability to recoup substantial costs in research and development, including clinical trials and other tests necessary to obtain regulatory approval from the Food and Drug Administration (FDA). However, because they may operate to deter or delay competition from generic drug and biosimilar manufacturers, IP rights have been criticized as contributing to high prices for pharmaceutical products in the United States.
Two main types of IP may protect pharmaceutical products: patents and regulatory exclusivities. Patents, which are available to a wide range of technologies besides pharmaceuticals, are granted by the U.S. Patent and Trademark Office (PTO) to new and useful inventions. Pharmaceutical patents may claim chemical compounds in the pharmaceutical product, a method of using the product, a method of making the product, or a variety of other patentable inventions relating to a drug or biologic. The holder of a valid patent generally has the exclusive right to make, use, sell, and import the invention for a term lasting approximately 20 years. If a court concludes that a competitor's generic or biosimilar version infringes a valid patent, the court may issue an injunction precluding the competitor from making, using, selling, and importing that competing product until the patent expires.
In some circumstances, FDA grants regulatory exclusivities to a pharmaceutical manufacturer upon the completion of the process required to market pharmaceutical products. Before a new drug or biologic can be sold in the United States, companies must apply for regulatory approval or licensure from FDA, which determines if the pharmaceutical is safe and effective. For certain pharmaceuticals, such as innovative products or those that serve particular needs, FDA provides a term of marketing exclusivity upon the successful completion of the regulatory process. If a product is covered by an unexpired regulatory exclusivity, FDA generally may not accept and/or approve an application seeking FDA approval of a follow-on product (i.e., a generic drug or biosimilar). Regulatory exclusivities vary in length from as little as six months to as much as 12 years depending on the specific type of drug or biologic at issue and other factors.
Like regulatory exclusivities, patent rights can affect when generic and biosimilar manufacturers can market their follow-on products. Pharmaceutical patent disputes are subject to certain specialized procedures under the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act (BPCIA). Under Hatch-Waxman, applicants seeking approval of a generic version of an existing FDA-approved drug must make a certification with respect to each patent that the brand-name drug manufacturer lists as covering the product. If the generic manufacturer challenges those patents, FDA generally cannot approve the generic drug application for 30 months while the patent dispute is litigated. For biologics, applicants seeking approval of a biosimilar version of an existing biological product may choose to engage in the BPCIA's "patent dance," a complex scheme of private information exchanges made in preparation for formal patent disputes between brand-name biologic and biosimilar manufacturers. The patent dance does not affect FDA's ability to approve a biosimilar application.
Some pharmaceutical companies have been criticized for charging high prices and engaging in practices that are perceived by some to exploit the existing legal system governing IP rights on pharmaceutical products. For example, some generic manufacturers have claimed that brand-name drug manufacturers have unreasonably refused to sell them samples of brand-name drugs in order to impede their ability to obtain FDA approval and delay market entry of generic competition. Other commentators have criticized the practice of "pay-for-delay" settlements, through which brand-name drug companies settle patent litigation with generic or biosimilar manufacturers by paying them to delay their entry into the market. Still others criticize so-called patent "evergreening," in which pharmaceutical companies are alleged to serially patent minor improvements or ancillary features of their products in order to extend the effective term of patent protection.
In recent years, a number of congressional proposals have been introduced that seek to address these and other issues in IP law that are perceived by some to contribute to high prices for pharmaceutical products. These proposed reforms range from relatively modest changes, such as increasing patent transparency, to more sweeping reforms such as pricing controls and government compulsory licensing provisions.