This is nicely stated. There is much wrong with the pharmaceutical industry including pay-to-delay generics, and abusive pricing non-innovative drugs, and that needs too be fixed.
Maybe more importantly, effectively communicating the costs and risks of drug development has, and the magnitude of the impact of successful drugs have on the improvement of health care is something the industry has done poorly.
There is much wrong with the pharmaceutical industry including pay-to-delay generic
I disagree on this one.
Pay-to-delay is just the branded drug manufacturer and the generic company splitting the difference through negotiation. What you end up with something in-between the two potential outcomes.
Situation: branded drug has 2 more years of patent life, but generic company wants to challenge it; neither party is sure they will prevail.
Outcome 1: patent holds and branded manufacturer gets entire market for two years/generic company loses money on legal fees
Outcome 2: patent holder loses patent and money on legal fees/generic company gets entire market for two years (yes, typically this doesn't happen, trying to simplify)
Instead of each party going to court and paying a ton in legal fees with an uncertain outcome, the pay-for-delay is splitting the difference. The branded manufacturer pays the generic company $X to delay entry until year 1. Everybody gets something from the deal.
They call it "pay-to-delay", but that ignores outcome #1, where the generic is delayed for an even longer period.
But you don't know option 2 would have been the outcome. Rather than both companies duking it out in court for a few years, the patient benefits when the generic entry happens quicker than if the patent held.
I guess the concern is that paying a company not to challenge the patent(and start the 6 month clock if the patent is lost) is anti-competitive and collusive.
I can see how that could be the perception. However, if the generic company is certain they could successfully challenge the patent, they'd never enter into such an agreement because there is a far higher payoff to move forward with the patent challenge.
It's the gray area cases that end up in pay for delay deals. The ones that neither party is sure they will win. So they cut their loses and negotiate middle ground where each of them get a piece of the pie.
That depends entirely on how much they are paid to delay. A successful pay to delay settlement can be more profitable for the generic than entering the market. That is to say, it is more profitable to share revenue from a monopoly than race to the bottom.
A classic example is GSK and TEVA with Lamictal. GSK priced the original drug at $465/dose with $1.5 billion in sales. Teva's Generic was $14/dose. TEVA happily agreed to be paid by GSK because if TEVA had won in court, entered the market, and captured 100%, they would only bring in 50 million a year
Do you have another source? The one you shared is light on details.
I'm not sure why TEVA would price at $14/dose at launch - most exclusive generics price at ~95% of the branded therapy, then drop once other generic entries happen. If the TEVA generic were to capture 50% of the market over 6 months, that's $600M+ in revenue, not $50M.
If the patent is invalidated, then what provides the generic company with exclusivity for two years-- I thought the regulatory exclusivity provided to first-in generics was only 6 months?
I'm not at all an expert on generics, but the company suing to remove exclusivity has almost certainly done some groundwork needed to produce the generic drug. They likely need to figure out how to produce the drug as well as some business stuff like market determination, so a second generic manufacturer is probably a bit behind.
for significant small molecule drugs, there is commonly a cohort of generic firms ready at expiry. There is usually little barrier to entry beyond the patent or regulatory exclusivities. Prices are typically crushed after the 6 months.
Biologics (antibodies/ vaccines) are a different story because of the complexity of their manufacturing and characterization.
