What is the price of pay-to-delay deals?

Bokhari, F.A.S. ORCID: https://orcid.org/0000-0001-5418-8078 (2013) What is the price of pay-to-delay deals? Journal of Competition Law and Economics, 9 (3). pp. 739-753. ISSN 1744-6414

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When a branded drug manufacturer makes a payment to a potential entrant to delay generic entry, it raises anticompetitive concerns. In this article, I highlight one such deal in a subsegment of drugs used to treat attention deficit hyperactivity disorder (ADHD)-mixed amphetamine salts (MAS)-and compute market equilibrium prices under three counterfactuals. In the first case, equilibrium prices are computed as if all MAS drugs were produced by a single profit-maximizing firm, while in the latter two counterfactuals, I compute equilibrium prices as if either an immediate-release generic or an extended-release branded drug were not available in the market. The simulations show that the average percentage increase in drug prices is 4 to 4.5 times larger in the latter two cases (when one of the drugs is not available in the market) compared with a simple joint profit maximization of the same products. In this respect, the challenges by the Federal Trade Commission (FTC) to the so called "pay-to-delay" deals and the recent legislations introduced into the Congress to ban such deals are justified.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
UEA Research Groups: Faculty of Social Sciences > Research Groups > Industrial Economics
Faculty of Social Sciences > Research Centres > Centre for Competition Policy
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Depositing User: Pure Connector
Date Deposited: 15 Nov 2013 14:16
Last Modified: 17 May 2023 00:56
URI: https://ueaeprints.uea.ac.uk/id/eprint/44432
DOI: 10.1093/joclec/nht016

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