Drug Prices: The Role of Patents and Regulatory Exclusivities

Intellectual property (IP) rights play an important role in the development and pricing of prescription drugs and biologics. To encourage innovation, IP law grants inventors exclusive rights in a particular invention or product, potentially enabling them to charge higher-than competitive prices. IP rights 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 U.S. Food and Drug Administration (FDA). However, IP rights have been criticized as contributing to high prices for pharmaceutical products in the United States by operating to deter or delay competition from generic drug and biosimilar manufacturers.

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