A Simple Solution to the Problem of 'Product Hopping'

Abstract

Brand-name drug companies frequently switch from one version of a drug to another. Sometimes, the switch is made just to keep the generic off the market. Should this anticompetitive “product hopping” be allowed? Surprisingly, several courts have said yes. These courts have found that when the drug company leaves the original version on the market, consumers cannot be harmed since they have a “choice.” This position, however, is at odds with the realities of the pharmaceutical industry, in which doctors prescribe but do not pay for the drug and consumers (or their insurers) pay for but do not choose it.

In this piece, I explain why legislation addressing product hopping is the best option to address this anticompetitive behavior. I focus on the Affordable Prescriptions for Patients Act of 2021, bipartisan legislation that addresses the harms from product hopping while appropriately deferring to any reasonable justifications the drug company could offer. I explain how the legislation is conservative in several ways. I address the industry’s argument that product-hopping legislation harms innovation. And I conclude that legislation can play a crucial role in ensuring that consumers have access to affordable generic medicines.

Keywords: product hopping, pharmaceuticals, drugs, antitrust, patent, legislation

JEL Classification: I18, K21, L40, L41, L43, L65, O34, O38