The Distribution of Surplus in the US Pharmaceutical Industry: Evidence from Paragraph (iv) Patent Litigation Decisions
47 Pages
Posted: 18 Aug 2014
Last revised: 16 Jun 2017
FDA
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics
University of North Carolina (UNC) at Chapel Hill - Department of Economics
Date Written: June 2, 2017
Abstract
In Paragraph (iv) pharmaceutical cases, a patent-litigation decision often determines whether a brand-firm monopoly continues or generic entry occurs. Using unique patent- litigation data and an event-study approach that accounts for probabilistic district- court decisions and an appellate process, we estimate that brand-firm stakes in such cases average $4.6 billion while generic-firm stakes average $236.8 million. After the Schering-Plough vs. FTC decision in 2002 that upheld a settlement where the brand firm paid the generic in return for delayed entry, we find settlement is more likely and stakes are significantly lower, despite higher average brand sales for the drugs in the cases.
Keywords: Paragraph (iv), generic entry, deterrence, event study, patent litigation, pay for delay
JEL Classification: L51, I10, I18, K23
Suggested Citation:
Suggested Citation
Jacobo-Rubio, Ruben and Turner, John L. and Williams, Jonathan W., The Distribution of Surplus in the US Pharmaceutical Industry: Evidence from Paragraph (iv) Patent Litigation Decisions (June 2, 2017). Available at SSRN: https://ssrn.com/abstract=2481908
