Understanding the Hatch-Waxman Act Through Effective Patent Length
Haverford College. Department of Economics
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The Hatch-Waxman Act was made law September 24, 1984. The goal of this law was to decrease the barriers to enter into the market for generic drugs while maintaining incentives for researching new drugs. The Act decreased the time it took to approve ageneric through the ANDA and allowed generic companies the right to research using the original drug while it was still patented. In return the originally marketed drug received the right to recoup some of the time lost on its patent from the FDA approval process. To measure if this it true, I looked at the effective patent length of original drugs before and after Hatch-Waxman. The effective patent length is the time the original drug has no market competition. In order to maintain incentives to research, this length needs to stay the same or increase. This is due to low switching costs from original to generic drugs. To show that the Act decreased barriers to entry into the market, I looked at new generic market entries for specific compounds before and after Hatch-Waxman. Overall, the Hatch-Waxman Act was ineffective at maintaining incentives for research and development by keeping the effective patent length the same (or market exclusivity), but was successful in increasing generic competition.