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Appl Health Econ Health Policy. 2011 May 1;9(3):171-81. doi: 10.2165/11539060-000000000-00000.

Patent extension policy for paediatric indications: an evaluation of the impact within three drug classes in a state Medicaid programme.

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1
School of Medicine, University of Utah, Division of Epidemiology, Salt Lake City, Utah 84148, USA. richard.nelson@utah.edu

Abstract

BACKGROUND:

The Food and Drug Administration Modernization Act (FDAMA) of 1997, Best Pharmaceuticals for Children Act (BPCA) of 2002 and Pediatric Research Equity Act of 2007 provide an extended period of 6 months of marketing exclusivity (i.e. patent extension) to prescription drug manufacturers that conduct paediatric studies. Branded drugs in the statin, ACE inhibitor and selective serotonin reuptake inhibitor (SSRI) classes were three of many classes with drugs granted patent extensions.

OBJECTIVE:

We estimated the cost impact of the 6-month exclusivity extension policy on the Utah Medicaid drug programme by comparing actual costs to projected costs had the 6-month exclusivity extension not been granted for these drugs and thus less expensive generic alternatives been available sooner. Using these results, we then projected the cost impact of this policy on Medicaid programmes in the US during the 18 months following patent expiration.

METHODS:

The Utah Medicaid prescription claims obtained for statins, ACE inhibitors and SSRIs included reimbursement amount, number of units dispensed, days supplied, date of service and drug strength. Actual expenditures for each drug were calculated for the 6 months before and 12 months after generic availability. The percentage difference between the brand name prescription reimbursement amount to Medicaid in the last 2 months of the 6-month extension and the generic prescription reimbursement amount to Medicaid in the first 2 months following exclusivity expiration was then calculated for each drug. This was done using data from the 5 months surrounding the exclusivity expiration by regressing the log-transformed Utah Medicaid reimbursement amount on an indicator for patent expiration, controlling for number of units, volume of sales, month filled and strength. This was used to estimate what the initial generic prescription price would have been without the 6-month patent extension and what costs would have been in the 18 months following the original expiration date if the patent extension had not been granted. Medicaid rebates were assumed to be 15.1% for branded products and 11% for generics.

RESULTS:

The 6-month extension policy was estimated to cost Utah's Medicaid $US2.2 (95% CI 1.9, 2.4) million for these three drug classes over the 18 months following the original patent expiration date (year 2007 values). Projected to the US Medicaid population, this cost was $US430 (95% CI 371, 475) million. For the individual drugs that we examined, the percentage cost decrease in reimbursement amount resulting from exclusivity expiration and generic entry ranged from 24.4% (pā€‰<ā€‰0.001) for enalapril to 3.8% (pā€‰=ā€‰0.0951) for pravastatin sodium.

CONCLUSIONS:

Makers of the branded drugs evaluated were given market exclusivity extensions for conducting studies of their medications in children. The costs found in this study are just a small portion of the total paid, which include those born by other payers. Whether the benefits of this policy outweigh these costs is an open question, but these results suggest that the costs to Medicaid and thus taxpayers are substantial.

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