Entry Limiting Agreements for Pharmaceuticals: Pay-for-Delay and Authorized Generic Deals
43 Pages Posted: 4 Jul 2015 Last revised: 10 Aug 2017
Date Written: April 2017
Pay-to-delay deals involve a payment from a branded drug manufacturer to a generic maker to delay entry. In return, the generic receives a payment and/or an authorized licensed entry at a later date but before the patent expiration. We examine why such deals are stable. We combine the first mover advantage for the first generic with the ability of the branded manufacturer to launch an authorized generic to show when pay-to-delay deals are an equilibrium outcome. Policy simulations show that removing the ability to launch authorized generics will deter such deals but removing exclusivity period for first generic will not.
Keywords: pharmaceuticals, pay-to-delay, reverse payments, authorized generics, Nash bargaining
JEL Classification: L21, L41, K41
Suggested Citation: Suggested Citation