Economics of Fixed-Dose Combination Drugs Approved in the United States

Patent is the most important form of intellectual property protection for new drugs. Patent extension and market exclusivity currently serve as major regulatory incentives to promote new drugs. Combination drug, or fixed-dose combination (FDC) are formulations that contain two or more active ingredients in a single pill. FDCs, especially combinations of singe drugs that are already in the market, are common strategy for brand-name drug companies to extent the patent and exclusivity life. The substitution of single drug products that soon have generic alternatives with newer, brand-name combinations lead to potential increases in pharmaceutical expenditures and raises concerns on economic burden. The study found that the effective patent life increased overtime during the past three decades; however the effective patent life length was not significantly associated with an increase in the number of approved new molecular entities (NMEs), which often represent innovative new drugs. Other incentives, besides the patent life, need to be considered as effective incentives to stimulate pharmaceutical innovations. The findings support hypothesis that the number of FDC approvals increased overtime from 1980s to 2012, while the approval number of the NME and new therapeutic Biologics License Applications decreased during last decade. The findings also support hypothesis that the pharmaceutical company market FDC drugs shortly before the generic versions of the single ingredients enter the market extending the patent and marketing exclusivity life of drugs included in the combination. In regard to the economic concern of the FDC, the study found that the FDC average wholesale price (AWP) unit price increased significantly over time 1980-2012 and that pharmaceutical companies set FDC AWP, at the same level of the costliest single active ingredient in the combination as pricing strategy to shift demand from single active ingredients facing generic competition toward new FDC drugs. The price difference between FDC and single ingredient drugs varied by therapeutic class, the year the FDC entered into the US market and the number of single drugs in the combination that have generic drugs at FDC market entry