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Antitrust in the Pharmaceutical Industry: An Introduction to Brand-Generic Competition

Antitrust in the Pharmaceutical Industry: An Introduction to Brand-Generic Competition Scott Hemphill New York State Office of the Attorney General George Mason University May 3, 2012. GENERIC ENTRY LOWERS PRICES. Average price of fluoxetine before and after generic entry.

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Antitrust in the Pharmaceutical Industry: An Introduction to Brand-Generic Competition

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  1. Antitrust in the Pharmaceutical Industry: An Introduction to Brand-Generic Competition Scott Hemphill New York State Office of the Attorney General George Mason University May 3, 2012

  2. GENERIC ENTRY LOWERS PRICES Average price of fluoxetine before and after generic entry Dollars per Extended Unit Source: Frank and Hartman (2009)

  3. EVEN WITH A CHALLENGE, BRAND-NAME DRUGS ENJOY SUBSTANTIAL EXCLUSIVITY Effective market life and nominal patent term by drug, for drugs with challenges Source: Hemphill and Sampat, Evergreening, Patent Challenges, and Effective Market Life in Pharmaceuticals, Journal of Health Economics (2012) Note: NMEs with first generic entry 2001-2010

  4. LITIGATION OUTCOMES VARY BY PATENT TYPE Outcome by patent type Brand wins Generic wins Active ingredient (AI) patent 34 5 Non-AI patent 34 57 Source: Hemphill, Sampat and Tilipman (working paper 2012) Notes: drugs first eligible for challenge 2000-2010; excludes pending cases

  5. PAYMENT ALTERS THE SETTLEMENT BARGAIN Litigation ends Patent expires Litigation brand + generic brand only Entry Settlement brand only brand + generic $ $$ $$$ Source: Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, NYU Law Review (2006)

  6. FOR WEAK PATENTS, THE PAY-FOR-DELAY INCENTIVE IS STRONGER Outcome by patent type Brand wins Generic wins Settles Active ingredient (AI) patent 34 5 28 [40%] Non-AI patent 34 57 133 [60%] Source: Hemphill, Sampat and Tilipman (working paper 2012) Notes: drugs first eligible for challenge 2000-2010; excludes pending cases

  7. FOR WEAK PATENTS, THE PAY-FOR-DELAY INCENTIVE IS STRONGER Source: Hemphill, Sampat and Tilipman (working paper 2012) Notes: drugs first eligible for challenge 2000-2010; excludes pending cases

  8. SETTLEMENT WITH “RETAINED EXCLUSIVITY” PRESENTS A FURTHER HARM Litigation Competition Settlement brand only brand + generic Source: Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, NYU Law Review(2006)

  9. CONCLUSIONS Generic challenges shorten brand exclusivity, but only somewhat Patent type matters: “non-AI” patents are where the action is The 180-day bounty matters: its effect on incentives is central to any realistic theory of settlement

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