Glover, 2007). To accomplish the latter objective, the legislation created two new “data exclusivity” rules.

The first exclusivity rule provides that truly innovative drugs—new chemical entities (also called new molecular entities)—receive a 5-year period of data exclusivity, during which the sponsor of a generic drug must submit a full New Drug Application that relies on its own preclinical and clinical data. At the end of 5 years (4, if the generic drug applicant chooses to challenge the innovator’s patents), the applicant can submit an ANDA that need only show that its product is the same as, and bioequivalent to, the innovator’s product.8

The second exclusivity rule provides that other applications for approval that are supported by clinical data (e.g., those involving new formulations of the drug) receive 3 years of exclusivity. Again, during the period of exclusivity, generic versions can be approved only if sponsors provide their own clinical data on safety and efficacy.9

In 1997, Congress enacted the Best Pharmaceuticals for Children Act (as part of the FDA Modernization Act) to encourage the testing of pharmaceuticals for children. If a company conducts pediatric studies in response to a written request from FDA and complies with various requirements relating to these studies, the law provides for an extension of 6 months to the exclusivity periods described above. Thus, for example, the 5-year prohibition on the submission of an abbreviated application becomes 5 years and 6 months.

The market exclusivity incentive for orphan drugs is broader than the various types of exclusivity discussed above. During the period of exclusivity, FDA cannot approve an application from a different manufacturer


A generic product is the same as the innovator product if it has the same active ingredient, route of administration, dosage form, and strength (CDER, 2003). The law permits differences in these characteristics, with prior agency approval, if no clinical data are needed to establish the safety or effectiveness of the generic product. Generally, a generic drug is bioequivalent to the innovator product if there is not a significant difference in the rate and extent of absorption of the drug when administered at the same molar dose of the therapeutic ingredient under similar experimental conditions.


Congress also tied the timing of generic drug approval to certain patents covering the innovator drug. For any unexpired patent that claims the brand drug or a method of using the brand drug, a generic applicant is required to choose between waiting for the patent to expire or challenging the patent (as invalid or not infringed). If the generic applicant chooses to wait, FDA may not approve the generic application until the patent expires. If the generic applicant challenges the patent, then complex patent litigation provisions are triggered. As a practical matter, under these provisions, if the drug is a new chemical entity and the innovator enforces its patent by bringing a lawsuit, the generic application cannot be approved until 7.5 years after approval of the brand drug. In some situations, litigation is still going on at the end of this time. In these cases, FDA may approve the generic drug, and the generic company may market the product, although it markets “at risk” of substantial damages if it loses the patent case.

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