What is the price of pay-to-delay deals?

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3 Citations (Scopus)

Abstract

When a branded drug manufacturer makes a payment to a potential entrant to delay generic entry, it raises anticompetitive concerns. In this article, I highlight one such deal in a subsegment of drugs used to treat attention deficit hyperactivity disorder (ADHD)-mixed amphetamine salts (MAS)-and compute market equilibrium prices under three counterfactuals. In the first case, equilibrium prices are computed as if all MAS drugs were produced by a single profit-maximizing firm, while in the latter two counterfactuals, I compute equilibrium prices as if either an immediate-release generic or an extended-release branded drug were not available in the market. The simulations show that the average percentage increase in drug prices is 4 to 4.5 times larger in the latter two cases (when one of the drugs is not available in the market) compared with a simple joint profit maximization of the same products. In this respect, the challenges by the Federal Trade Commission (FTC) to the so called "pay-to-delay" deals and the recent legislations introduced into the Congress to ban such deals are justified.
Original languageEnglish
Pages (from-to)739-753
Number of pages15
JournalJournal of Competition Law and Economics
Volume9
Issue number3
DOIs
Publication statusPublished - 1 Sep 2013

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