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Entry limiting agreements: First mover advantage, authorized generics and pay-for-delay deals

Farasat Bokhari, Franco Mariuzzo and Arnold Polanski
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Farasat Bokhari: Centre for Competition Policy and School of Economics, University of East Anglia
Franco Mariuzzo: Centre for Competition Policy and School of Economics, University of East Anglia
Arnold Polanski: School of Economics, University of East Anglia

No 2015-05v4, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: During patent litigation, pay-for-delay deals involve a payment from a patent holder of a branded drug to a generic drug manufacturer to delay entry and withdraw the patent challenge. In return for staying out of the market, the generic firm 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 when there are multiple potential entrants. 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-for-delay deals are an equilibrium outcome. We further show that limiting a branded firm's ability to launch an authorized generic prior to entry by a successful challenger will deter such deals. However, removing exclusivity period for the first generic challenger will not.

Keywords: pharmaceuticals; pay-for-delay; reverse payments; authorized generics; first mover advantage (search for similar items in EconPapers)
JEL-codes: L41 K21 K41 (search for similar items in EconPapers)
Date: 2020-01-01
New Economics Papers: this item is included in nep-bec, nep-com and nep-law
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