• The Financial District


Researchers from the University of East Anglia (UEA) in the United Kingdom have recommended a ban on the practice in the pharmaceutical industry that allows big drug companies to cut deals with competitors to prevent them from manufacturing cheaper generic alternatives.

Previous studies have found that a pay-for-delay deal can cost as much $3.5 billion per year to US consumers - with prices dropping by as much as 75% after generic entry - and can slow a generic entry to the market by up to five years, the researchers said in their article “Entry limiting agreements: first mover advantage, authorized generics and pay-for-delay deals,” written by Farasat A.S. Bokhari, Franco Mariuzzo, Arnold Polanski, in the Journal of Economics & Management Strategy on May 22, 2020.

New research from the University of East Anglia (UEA) recommends changes to the system which sees drug companies strike deals with competitors to stop them producing cheaper generic alternatives, with Bokhari, Mariuzzo and Polanski, of UEA's School of Economics and Centre for Competition Policy, developing a model of generic entry and patent litigation to show that the branded firm can pay off the first generic challenger and then ward off entry by second or later challengers by threatening to launch an authorized generic via the first paid-off challenger. The model captures the essential features of market entry rules for drugs and the patent litigation in both Europe and the US.

Dr Bokhari concluded in this wise: "While pay-for-delay deals may be beneficial to some extent, in that they might save courts and administrative bodies, such as patent offices, time and effort, they allow branded drug firms to charge monopoly prices and in a typical deal there may be several years delay in a cheaper version becoming available… Investigation and fines can be important in deterring such deals. However, the more important policy question is what can be done to prevent such entry limiting agreements in the first place?”

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