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Would The Per Se Illegal Treatment Of Reverse Payment Settlements Inhibit Generic Drug Investment?

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  • Bret M. Dickey
  • Daniel L. Rubinfeld

Abstract

“Reverse payment” patent settlements between brand and generic pharmaceutical manufacturers have received substantial scrutiny in recent years. While much has been written about the appropriate antitrust policy towards these settlements, the literature has paid little attention to the effect that changes in that policy might have on the incentives of generic manufacturers to develop generic drugs and challenge branded patents. We present a basic economic model of generic manufacturers' investment decisions and argue that these incentives should be taken into account in evaluating policy issues. We conclude that a per se rule against “reverse payment” patent settlements could chill the incentives for generic investment by increasing the cost and uncertainty of patent litigation, and could deprive consumers of benefits from lower cost generic drugs.

Suggested Citation

  • Bret M. Dickey & Daniel L. Rubinfeld, 2012. "Would The Per Se Illegal Treatment Of Reverse Payment Settlements Inhibit Generic Drug Investment?," Journal of Competition Law and Economics, Oxford University Press, vol. 8(3), pages 615-625.
    • Handle: RePEc:oup:jcomle:v:8:y:2012:i:3:p:615-625.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhs021
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    Citations

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    Cited by:

    1. Sencer Ecer & Rodrigo Montes & David Weiskopf, 2020. "On the Application of Nash Bargaining in Reverse Payment Cases in the Pharmaceutical Industry," European Journal of Law and Economics, Springer, vol. 50(1), pages 133-147, August.
    2. Anton‐Giulio Manganelli, 2021. "Reverse payments, patent strength, and asymmetric information," Health Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 20-35, January.
    3. Manganelli, Anton-Giulio, 2023. "Pay-for-delay settlements and patent expansion practices," Information Economics and Policy, Elsevier, vol. 64(C).
    4. Sana Rafiq & Max Bazerman, 2019. "Pay-for-Monopoly? An Assessment of Reverse Payment Deals by Pharmaceutical Companies," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 3(1), pages 37-43, March.
    5. Ding, Yucheng & Zhao, Xin, 2019. "Pay-for-delay patent settlement, generic entry and welfare," International Journal of Industrial Organization, Elsevier, vol. 67(C).

    More about this item

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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