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Reverse payments and generic entry competition

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  • WAN, Jiangyun(Yunyun)

Abstract

In the United States, brand-name drug manufacturers often pay generic companies to delay marketing of their generic products. In this paper we develop an analytical framework to examine the implications of banning reverse payment settlements. We first find that reverse payment settlements occur when generic firms face relatively high entry cost but do not when entry costs are sufficiently low. We next show cases in which reverse payment settlements are harmful to brands. We also consider the counterfactual case when 180-day marketing exclusivity rights are removed from Hatch-Waxman and find that the absence of marketing exclusivity rights encourages brands to proceed with reverse payment settlements.

Suggested Citation

  • WAN, Jiangyun(Yunyun), 2016. "Reverse payments and generic entry competition," IIR Working Paper 16-09, Institute of Innovation Research, Hitotsubashi University.
    • Handle: RePEc:hit:iirwps:16-09
    Note: This revision: August 16, 2016
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    reverse payment settlements; generic entry competition; Hatch-Waxman; marketing exclusivity;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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