Vol. LV No. 2

Making Do in Making Drugs: Innovation Policy and Pharmaceutical Manufacturing

Abstract: Despite increasing recalls, contamination events, and shortages, drug companies continue to rely on outdated manufacturing plants and processes. Drug manufacturing’s inefficiency and lack of innovation stand in stark contrast to drug discovery, which is the focus of a calibrated innovation policy that combines patents and FDA regulation. Pharmaceutical manufacturing lags far behind the innovative techniques found in other industries due to high regulatory barriers and ineffective intellectual property incentives. Among other challenges, although manufacturers tend to rely on trade secrecy because of the difficulty in enforcing patents on manufacturing processes, trade secrecy provides limited incentives for innovation. To increase those incentives, this Article suggests several direct regulatory reforms and proposes novel ways to use those reforms to improve innovation policy in drug manufacturing and beyond. For example, the FDA could operate a system of temporary market exclusivity for manufacturing innovation parallel to the patent system. Alternatively, the FDA could require disclosure of manufacturing methods to drive the industry from opacity and trade secrecy towards transparency and patent protection for innovation. Overall, the potentially immense economic and health benefits from more innovative manufacturing in the drug industry suggest that manufacturing may be a profitable target of innovation policy in other highly regulated industries and that manufacturing in general deserves a more prominent place in innovation policy and theory.

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