Drug patents and market exclusivity: why new medicines are expensive

When a new medicine arrives on the market, it often carries a premium price. This high cost is not solely tied to the expense of manufacturing the active ingredient; it is largely a product of the international intellectual property system. Governments grant pharmaceutical companies temporary monopolies—through patents and regulatory market exclusivity—so they can recover the substantial costs of research, development, and clinical trials. Understanding how these legal protections work helps explain why new medicines are so expensive and why their prices eventually fall when generic versions are permitted to enter the market. The system is fundamentally designed to strike a balance: rewarding medical innovation while eventually allowing broader public access to lower-cost treatments.

Patents and effective exclusivity

A patent is a legal right granted by a government that prevents others from making, using, or selling an invention for a set period. Globally, the standard patent term is 20 years from the date the patent application is filed. However, a medicine cannot be sold until it passes rigorous clinical trials and receives regulatory approval from bodies like the FDA or SAHPRA, a process that can take a decade or more. Consequently, the "effective exclusivity" period—the time a company actually has to sell the drug without generic competition—is generally only half of the original patent life. On top of this, regulators often grant "data exclusivity," which prevents generic manufacturers from relying on the originator's clinical trial data for a certain number of years. This adds another layer of protection that delays cheaper alternatives, independent of the patent status.

Evergreening and patent thickets

As a medicine's primary patent nears expiration, manufacturers commonly seek additional patents on secondary aspects of the drug, such as specific salt forms, crystalline structures, new dosages, or delivery mechanisms. This practice, widely known as "evergreening," can effectively extend a manufacturer's monopoly beyond the life of the original active ingredient patent. Critics argue that evergreening delays generic entry and keeps medicine prices artificially high, while proponents claim it rewards incremental innovations that improve how a drug is absorbed or administered. To protect their products, companies sometimes build "patent thickets"—dense webs of overlapping patents that make it legally difficult and expensive for competitors to introduce a generic version without facing complex litigation. Some countries have stricter criteria for granting secondary patents to prevent this, whereas others maintain more lenient standards.

When generics can enter

Once all relevant patents and regulatory exclusivity periods expire, the market opens to generic manufacturers. Generic medicines contain the same active ingredient and must demonstrate bioequivalence, meaning they work in the body in the same way and to the same extent as the originator product. Because generic companies do not need to repeat the expensive Phase I to Phase III clinical trials, their development costs are drastically lower, allowing them to sell the medicine for a fraction of the original price. Sometimes, originator companies will introduce an "authorised generic"—selling their own drug under a different label or through a subsidiary—to retain a share of the lower-priced market. For consumers in South Africa, tools like HealthSA can be used to search for these registered alternatives and compare their Single Exit Prices once the market exclusivity period ends.

TRIPS flexibilities and public health

International intellectual property rules are governed by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Recognising that strict patents can hinder access to essential medicines during health crises, the World Trade Organization affirmed the Doha Declaration in 2001, allowing countries to use "TRIPS flexibilities" to protect public health. These flexibilities include compulsory licensing, where a government allows a domestic manufacturer to produce a generic version of a patented drug (with appropriate compensation to the patent holder) during a national emergency. Another flexibility is parallel importation, allowing countries to buy the same patented medicine from a cheaper global market without the patent holder's consent. Least-developed countries have longer transition periods to implement these patent rules. Regulators like SAHPRA play a key role in balancing these international trade rules with local public health needs by ensuring the safety and quality of medicines entering the market under these provisions.