Modern antibiotics, therapeutic antibodies, and gene therapy are among the many illustrations of the immense impact of pharmaceutical innovation on social welfare. Despite the remarkable progress achieved over the past century, many challenges lie ahead. Numerous debilitating diseases still lack a cure, whereas curing or treating others exposes patients to serious adverse
effects or inconveniences of various kinds. The spotlight is on the pharmaceutical industry, which is expected to deliver breakthrough and improved treatments in a timely manner.
The process of drug innovation is simultaneously collaborative and competitive. Firms pool resources to overcome profound uncertainty, regulatory complexity, and high costs. At the same time, they compete intensely. Innovation competition in the pharmaceutical context unfolds in three stages: during research and development, when product candidates race to pioneer a new market; once the market emerges, through pressure from pipeline products or other patented drugs targeting the same disease; and after patents and regulatory exclusivities expire, when competition shifts to integrating off-patent molecules into new combination products or developing novel methods of drug administration.
At each stage of competition, innovating firms operating across borders are inherently exposed to the risk of encountering roadblocks created by third-party exclusive rights. These exclusivities promote innovation precisely by allowing rightsholders to limit rivals’ freedom to operate and reduce competitive pressure. Some of them, particularly patents and trade secrets, exhibit considerable potential for strategic use by their rightsholder against competitors. This work delineates the circumstances in which the negative effects of strategic blocking on innovation outweigh the utilitarian effect of valid rights. It then examines how European and US patent and trade secret laws address this risk, as well as the limits of their built-in remedies for overprotection and abuse. Against that background, it is argued that antitrust laws can play a supplementary role in promoting drug innovation, provided that decision-makers adopt an analytical framework that sufficiently reduces the risk of enforcement errors.
The proposed framework for this purpose rests on a two-step inquiry. The first step focuses on the stage of competition at which the blocking occurs. This prima facie inquiry provides valuable guidance as to whether authorities should dismiss a given case or carry out a more detailed analysis. Where the results call for an in-depth substantive assessment, the second step seeks to distinguish pro-competitive from anti-competitive blocking. To that end, the inquiry focuses on the capabilities, resources, and incentives of the parties involved. The critical question becomes whether exclusion is genuinely harmful to innovation in light of those factors.
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