Reexamining Drug Regulation from the Perspective of Innovation Policy

The patent system typically takes credit for motivating biopharmaceutical innovation by making it profitable, while drug regulation gets blamed for burdening innovation with bureaucratic costs and delays. But FDA regulation in fact promotes profitability by prolonging exclusivity in product markets and by protecting against parallel imports. Firms may prefer FDA-administered exclusivities to expanded patent protection because they protect product markets without also adding to R&D costs. FDA-administered exclusivities may also face fewer legal and political obstacles than expanded patent protection, although as pressure mounts to constrain the rising costs of drugs, the political environment is changing.