U.S. law is intended to foster competition in the drug industry. Whenever a patent on a drug expires, the Hatch-Waxman Act is supposed to make it relatively fast and easy for competitors to put generic versions on the market.  

Such competition is good for consumers, health care providers, the government and everyone else who pays for prescription medicines because it slashes the price of drugs. “The first generic version of a drug causes the price to drop dramatically. The second generic onto the market drops the price to peanuts,” says Prof. Marsha Cohen of University of California Hastings Law School.

These price drops can grievously injure the profits of innovative drug companies, so these businesses have a powerful incentive to delay generic competition to their popular products for as long as possible. “Given the amount of money involved—sometimes billions per year, often hundreds of millions per year—any additional exclusivity period is worthwhile. Even an additional six months of exclusivity can bring nine figures in additional revenue,” says Anthony Fitzpatrick, a partner at Duane Morris.