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Reverse payments, patent strength, and asymmetric information

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  • Anton‐Giulio Manganelli

Abstract

Reverse payments (pay‐for‐delay) are payments from an originator to a generic pharmaceutical producer to settle a potential litigation. In many jurisdictions, these payments are banned. This study shows that when the parties' investments are considered and the information about the patent strength is asymmetric, reverse payments increase both the possibility of generic entry and the litigation rate—both of which increase consumer surplus and do not necessarily delay generic entry. Reverse payments typically increase consumer surplus when the asymmetry between the parties is low, the competitiveness in the market is soft, and their size is small. Results suggest that a ban per se may be suboptimal.

Suggested Citation

  • Anton‐Giulio Manganelli, 2021. "Reverse payments, patent strength, and asymmetric information," Health Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 20-35, January.
  • Handle: RePEc:wly:hlthec:v:30:y:2021:i:1:p:20-35
    DOI: 10.1002/hec.4174
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 4th January 2021
      by Chris Sampson in The Academic Health Economists' Blog on 2021-01-04 12:00:05

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