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What Is The Price Of Pay-To-Delay Deals?

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  • Farasat A.S. Bokhari

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.

Suggested Citation

  • Farasat A.S. Bokhari, 2013. "What Is The Price Of Pay-To-Delay Deals?," Journal of Competition Law and Economics, Oxford University Press, vol. 9(3), pages 739-753.
  • Handle: RePEc:oup:jcomle:v:9:y:2013:i:3:p:739-753.
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    File URL: http://hdl.handle.net/10.1093/joclec/nht016
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    References listed on IDEAS

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    Cited by:

    1. Eric Helland & Seth A. Seabury, 2016. "Are Settlements in Patent Litigation Collusive? Evidence from Paragraph IV Challenges," NBER Working Papers 22194, National Bureau of Economic Research, Inc.
    2. Montez, João & Marxen, Annabelle, 2020. "Licensing at the patent cliff and market entry," CEPR Discussion Papers 14276, C.E.P.R. Discussion Papers.
    3. Atanu Saha & Yong Xu, 2023. "Estimating Brand Drugs’ Payoff from Pay-for-Delay Deals," Journal of Industry, Competition and Trade, Springer, vol. 23(1), pages 81-99, June.

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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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