Authorized Generic Drugs:
`Short-Term Effects and Long-Term Impact
`
`Exhibit 1130
`IPR2017-00807
`ARGENTUM
`
`Federal Trade Commission
`August 2011
`
`000001
`
`

`

`AUTHORIZED GENERIC DRUGS:
`SHORT-TERM EFFECTS AND LONG-TERM IMPACT
`———————
`A REPORT OF THE
`FEDERAL TRADE COMMISSION
`
`JON LEIBOWITZ
`WILLIAM E. KOVACIC
`J. THOMAS ROSCH
`EDITH RAMIREZ
`JULIE BRILL
`
`Joni Lupovitz
`Eileen Harrington
`Richard Feinstein
`David Vladeck
`Joseph Farrell
`Willard K. Tom
`Randolph W. Tritell
`Jeanne Bumpus
`Susan S. DeSanti
`Cecelia J. Prewett
`Donald S. Clark
`
`Report Drafters and Contributors
`
`Chairman
`Commissioner
`Commissioner
`Commissioner
`Commissioner
`
`Chief of Staff
`Executive Director
`Director, Bureau of Competition
`Director, Bureau of Consumer Protection
`Director, Bureau of Economics
`General Counsel
`Director, Office of International Affairs
`Director, Office of Congressional Relations
`Director, Office of Policy Planning
`Director, Office of Public Affairs
`Secretary of the Commission
`
`Karen A. Goldman, Office of the General Counsel
`William E. Cohen, Deputy General Counsel for Policy Studies, Office of the General Counsel
`Karen L. Grimm, Assistant General Counsel for Policy Studies, Office of the General Counsel
`Christopher N. Bryan, Office of the General Counsel
`Robert A. Nelson, Jr., Formerly Office of the General Counsel
`
`Brett W. Wendling, Bureau of Economics
`David R. Schmidt, Assistant Director, Office of Applied Research and Outreach, Bureau of Economics
`Mark Hertzendorf, Bureau of Economics
`Luke M. Olson, Bureau of Economics
`Hajime Hadeishi, Formerly Bureau of Economics
`Cagatay Koc, Formerly Bureau of Economics
`Gregory J. Kuczura, Formerly Bureau of Economics
`
`Ellen Connelly, Bureau of Competition
`Jamie Towey, Bureau of Competition
`
`Inquiries concerning this report should be directed to:
`William E. Cohen (202) 326-2110 or wcohen@ftc.gov
`David R. Schmidt (202) 326-2781 or dschmidt@ftc.gov
`
`000002
`
`

`

`EXECUTIVE SUMMARY
`
`This Report analyzes the competitive effects of authorized generic drugs (“AGs”).1 AGs
`are pharmaceutical products that are approved as brand-name drugs but marketed as generic
`drugs. AGs do not bear the brand-name or trademark of the brand-name drug or manufacturer,
`but the brand-name and AG products are manufactured to the brand’s specifications. In
`examining competitive effects, the Report looks both at the price and revenue effects of AG
`competition and at the potential long-term impacts on incentives for generics to challenge
`patents on brand-name drugs. The Report also assesses the competitive implications of patent
`litigation settlements in which brand-name companies refrain from offering an AG when the
`generic company agrees to defer its entry (so-called “pay-for-delay settlements”). For more than
`a decade, the Commission has expressed concern about brand-name companies paying generics
`to delay entry. As this Report observes, promises not to compete with generic entrants by
`marketing an AG are a common form of compensation to generics in such arrangements, and the
`competitive effects of such promises should therefore be analyzed in the same manner as other
`forms of consideration paid to generics.
`
`Authorized generics have a unique impact during the first six months of generic
`competition. Under the Hatch-Waxman Amendments, when the first generic (the “first-filer”)
`challenges the brand’s patent, the FDA may not approve any additional generic competitors until
`180 days after the first-filer launches its product.2 During that period, because of the absence of
`competition, both the generic drug price and the first-filer’s revenues are significantly higher
`than they would be when there are additional generic competitors. Congress created this
`exclusivity as an incentive for generic companies to enter as soon as possible by challenging
`invalid patents or patents that are not infringed.
`
`Competition from AGs during the 180-day exclusivity period has the potential to reduce
`both generic drug prices and generic firm revenues. The courts have ruled that 180-day
`exclusivity does not preclude a brand-name company from entering with its own generic because
`it already has approval for its product; therefore, it can sell an AG during that exclusivity
`
`1 The Federal Trade Commission conducted this study at the request of Senators Grassley, Leahy, and
`Rockefeller, as well as at the request of Representative Waxman, all of whom asked the Commission
`to examine the competitive effects of authorized generic drugs. See Letter from Senators Charles
`Grassley, Patrick Leahy, and John Rockefeller to Deborah Platt Majoras, Chairman, Fed. Trade
`Comm’n (May 9, 2005) (infra Appendix A); Letter from Hon. Henry A. Waxman, U.S. House of
`Representatives, to Deborah Platt Majoras, Chairman, Fed. Trade Comm’n (Sept. 13, 2005) (infra
`Appendix B). Then-Commissioner Leibowitz also requested the FTC to study “the competitive
`implications of authorized generics.” Jon Leibowitz, Commissioner, Fed. Trade Comm’n, Health Care
`and the FTC: The Agency as Prosecutor and Policy Wonk, Remarks at the Antitrust in HealthCare
`Conference 9–10 (May 12, 2005), http://www.ftc.gov/speeches/leibowitz/050512healthcare.pdf.
`2 21 U.S.C. § 355(j)(5)(b)(iv) (2010). Exclusivity now may be “shared” by two or more applicants
`filing on the same day. See 21 U.S.C. § 355(j)(5)(B)(iv)(I)–(II)(bb) (2010).
`
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`

`

`period.3 Brand-name companies now frequently launch an AG to compete with the first-filer.
`
`AGs thus have been the subject of controversy. Brand-name companies that offer AGs
`contend that they are procompetitive – that they make valuable products available to consumers
`at lower prices than those of brand-name products and provide competition that leads to lower
`generic prices overall. Some in the generic drug industry, in contrast, contend that AGs harm
`competition by drawing revenues away from generic firms during the 180-day exclusivity period
`provided for first-filers that challenge a brand-name company’s patents. They caution that this
`reduces the potential reward available to generics that challenge patents, thereby discouraging
`patent challenges that facilitate earlier generic competition and reduce prices for consumers.
`This, the AG critics argue, undermines long-run competition and the goals of the Hatch-Waxman
`Amendments.
`
`As a first step toward shedding light on this controversy, the Commission in June 2009
`issued an interim report that focused on the short-term effects of AGs during the 180-day
`exclusivity period (the “Interim Report”).4 That report presented an initial analysis suggesting
`that “consumers benefit and the healthcare system saves money during the 180-day exclusivity
`period when an AG enters the market, due to the greater discounting that accompanies the added
`competition provided by the AG.”5 The Interim Report, however, also found that “AG entry
`significantly decreases the revenues of a first-filer generic company during its 180-day
`exclusivity period.”6 Apart from a preliminary analysis of the use of AGs in patent litigation
`settlements, the Commission left most questions of long-term effects – including any possible
`impact of AG competition on the calculus of generic entry via patent challenges – for
`exploration in a final report.
`
`This final Report refines the short-term analysis of the Interim Report and expands the
`analysis to consider long-term effects. It combines information obtained by compulsory process
`from more than 100 brand-name and generic manufacturers with price and sales data acquired
`from commercial sources and information gleaned from FDA databases to assess AGs’
`competitive effects. Moreover, it updates and extends the Interim Report’s study of the use of
`AGs as a form of consideration in patent litigation settlement agreements.
`
`The new analysis finds that, depending on model specifications, competition from an
`authorized generic during the 180-day exclusivity period is associated with retail generic prices
`that are 4-8 percent lower and wholesale generic prices that are 7-14 percent lower than prices
`without authorized generic competition. On average, the retail price of a typical generic drug
`during the 180-day exclusivity period is 86 percent of the pre-entry brand price without AG
`
`3 See Teva Pharm. Indus. Ltd. v. Crawford, 410 F.3d 51, 54 (D.C. Cir. 2005).
`4 FED. TRADE COMM’N, AUTHORIZED GENERICS: AN INTERIM REPORT (“Interim Report”) (2009),
`http://www.ftc.gov/os/2009/06/P062105authorizedgenericsreport.pdf.
`Id., Executive Summary, at 2.
`Id.
`
`6
`
`5
`
`-ii-
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`competition and 82 percent of the pre-entry brand price when an AG competes. Similarly, the
`average wholesale price of a typical generic drug during exclusivity, which is 80 percent of the
`pre-entry brand wholesale price without an AG, falls to 70 percent of the brand price with AG
`competition. An analysis of authorized generic pricing over the long term provides no evidence
`that AG prices are higher than prices of other generics, allaying concerns that AGs might be less
`aggressive competitors.
`
`The new analysis also confirms the Interim Report’s finding that authorized generics
`have a substantial effect on the revenues of competing, generic firms during the 180-day
`exclusivity period; depending on how the models are specified, they estimate that the presence of
`authorized generic competition reduces the first-filer generic’s revenues by 40 to 52 percent, on
`average. Moreover, the impact of AG competition on first-filer revenues persists outside of
`exclusivity. Revenues of the first-filer generic manufacturer in the 30 months following
`exclusivity are between 53 percent and 62 percent lower when facing an AG.
`
`With regard to long-term incentive effects, the analysis concludes that the reduced
`revenue stemming from authorized generic competition during 180-day exclusivity has not
`affected the generic’s incentives in a way that has measurably reduced the number of patent
`challenges by generic firms. Any disincentive effects would likely be experienced in small
`markets or in situations where the generic had little chance of winning the patent suit anyway.
`The Report examines a variety of evidence to reach these conclusions.
`
`•
`
`Based on economic analysis, revenue lost from authorized generic competition
`would be most likely to affect decisions to challenge patents on products with
`small sales.
`
`"
`
`If a challenger anticipates a 50 percent chance of success, an expectation
`of AG competition could tilt the balance against bringing a patent
`challenge in markets with brand sales between $12 million and $27
`million, a range that accounts for 13 percent of drugs, but given their low
`sales, approximately one percent of total prescription drug expenditures.
`AGs, however, are rarely introduced for these small drugs. For the drugs
`with higher sales that frequently do attract AG competition, AGs may
`conceivably deter only a narrow range of challenges that the generic
`believes it will rarely win, meaning that the challenges are unlikely to
`result in early generic entry even if pursued.7
`
`7 For instance, for a drug with brand sales of $130 million, a generic that does not anticipate AG
`competition will expect a patent challenge to be profitable if it has at least a 4 percent chance of
`winning; with AG competition, that generic would need at least a 10 percent chance of winning to
`expect a patent challenge to be profitable. Under this mode of analysis, the AG might discourage a
`challenge only if the generic thinks the chance of winning is between 4 and 10 percent, i.e., when the
`challenge is unlikely to be successful. For larger drugs, the presence of an AG is critical to the patent-
`challenge decision only when the expected likelihood of success is even less than 10 percent.
`
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`•
`
`•
`
`Considerable evidence suggests that brand-name firms launch authorized generics
`to preserve their profits following the onset of generic competition. The
`evidence, however, also reveals that brand-name companies do recognize that
`authorized generics, when launched, reduce the revenues of generic rivals and
`could deter future generic entry.
`
`"
`
`"
`
`Brand-name firm documents frequently note that launching an AG at the
`time of generic entry increases revenue, but they also recognize that
`authorized generic competition reduces generic competitors’ profits and
`could discourage future patent challenges. The documents furnish no
`basis for deeming one rationale more important than the other.
`
`Brand-name firm AG marketing practices are consistent with revenue-
`enhancement following the onset of generic competition and do not
`suggest a sacrifice of overall profits to discourage generic entry. None of
`the econometric estimates provided evidence that brand-name firms
`sacrifice revenues by introducing AGs. Moreover, about two-thirds of the
`AGs studied were launched after 180-day exclusivity had ended or when
`no exclusivity had occurred. This does not preclude a disincentive effect
`for those AGs that were marketed during 180-day exclusivity periods, but
`it does suggest that other explanations for AG marketing should also be
`considered. Furthermore, almost all AGs marketed during exclusivity
`continued to be marketed for an extended period. Again, the pattern
`suggests that AG marketing provides value to brand-name firms distinct
`from any potential disincentive effect from devaluing 180-day exclusivity.
`
`Although none of the generic companies’ internal documents expressly discusses
`authorized generics as a factor in deciding whether to file a particular patent
`challenge or identifies specific instances when the expectation of an authorized
`generic dissuaded the company from challenging a patent,8 some generic
`companies’ internal documents do reflect a general concern that AGs could
`impact the profitability of patent challenges or suggest that AG competition
`requires generic firms to better manage their product selection and litigation
`processes. The document submissions provide no evidence that any firm has
`substantially abandoned its basic patent-challenge business strategy because of
`the proliferation of authorized generics. On the contrary, documents submitted by
`some generic companies question contentions that AGs create significant
`disincentives to patent challenges. Different generic companies have adopted
`different business strategies in the face of AG competition, and those strategies
`
`8 An absence of documents is not necessarily determinative: generic companies simply might not have
`recorded the reasons for a decision to refrain from filing a patent challenge. In reaching its
`conclusions, the Commission considered all the evidence before it; no single category, including the
`documents provided by generic firms, was dispositive.
`
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`

`appear to reflect how they view AGs and their potential long-term impact.
`
`•
`
`•
`
`Generic companies typically expect authorized generic competition during the
`180-day exclusivity period and often build that assumption into their forecasts,
`which means reducing the expected revenues for the generic challenger.9 And
`one company provided an analysis suggesting that this reduction in expected
`profits had led it to reject or defer filing patent challenges for two products in
`small markets.
`
`Finally, despite the presence of AG competition, generic companies have
`continued to challenge patents, even on brand-name drugs with small markets.
`
`"
`
`"
`
`"
`
`From 2003 through 2008, 17 percent of the drugs subject to a first patent
`challenge had sales below $50 million. The median revenue of drugs
`subject to a first patent challenge fell during this period, while AGs were
`becoming common, from $553 million to $131 million.
`
`The number of drugs receiving their first Paragraph IV certification
`approximately doubled between 2003 and 2008.10
`
`Generic companies’ willingness to pursue Paragraph IV challenges when
`they know that they are likely to share exclusivity with other generic
`companies indicates that AGs have not deterred generic challenges. The
`evidence comes from examination of patent challenges for new chemical
`entities, a category of drugs for which first-filers expect to have to share
`exclusivity.11 The percentage of such drugs drawing first-day patent
`challenges has increased greatly despite the likelihood of shared
`exclusivity, from 6 percent in 2002 to 73 percent in 2008.
`
`Each category of evidence has its limitations. And each category is consistent with some
`expected impact on incentives to challenge patents, particularly for drugs in small markets. On
`the whole, however, whether viewed from the perspective of a break-even analysis drawn from
`
`9 While the Report finds that AGs have infrequently been launched for drugs in markets with less than
`$50 million of annual brand sales, generic documents discussing assumptions about AG competition
`do not draw distinctions based on market size. The documentary evidence regarding this point,
`however, is limited.
`10 “Paragraph IV” generic drug applications, filed with the Food and Drug Administration pursuant to 21
`U.S.C. § 355(j)(2)(A)(vii)(IV), certify that a patent is invalid or will not be infringed by the generic
`drug and begin the process of generic entry via patent challenge.
`11 New chemical entities are drugs for which the active ingredient has not received previous FDA
`approval. For new chemical entities, the first day that applications with Paragraph IV certifications are
`allowed is four years after approval of the brand-name drug. This is a specific, known day, on which
`filers will expect to share exclusivity.
`
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`quantitative data, brand-name firm strategic documents and marketing practices, generic firm
`memoranda and forecasts, or the number of patent challenges observed even for small-market
`drugs, authorized generics appear not to have substantially altered generic firms’ willingness to
`enter by challenging questionable patents.
`
`While there is little evidence of authorized generic competition affecting the number of
`patent challenges, there is strong evidence that agreements not to compete with an authorized
`generic have become a way for brand-name companies to compensate generic competitors for
`delaying entry. These agreements can be part of “pay-for-delay” patent settlements, which have
`long concerned the Commission.12 These agreements involve a brand-name firm compensating a
`generic and the generic agreeing to delay its entry. One form that compensation can take is the
`brand’s commitment, in exchange for the first-filer’s agreement to delay entry, not to sell an AG
`during the first-filer’s 180-day exclusivity period. Because the first-filer’s revenue will
`approximately double absent an authorized generic, its revenues will be much larger by agreeing
`to delay than if it litigated, won, and faced AG competition. The generic firm benefits from
`greater profits during its 180-day exclusivity; the brand-name firm benefits from later generic
`entry; but consumers suffer from delay of generic competition. Because generics often are
`priced substantially below the price of brand-name drugs,13 even a few additional months
`without generic competition can significantly increase overall prescription drug costs.
`
`Settlements in which the brand-name company agrees not to compete with an AG have
`become commonplace. Between FY 2004 and FY 2010, 39 of 157 patent settlements with first-
`filer generics (approximately 25 percent) contained such provisions, which have been used with
`some frequency and have become common in agreements with pay-for-delay provisions.14 The
`average delay for the 39 agreements was 37.9 months, and the total market for the drugs
`involved (an indeterminate amount of which represented consumer harm tied to the practice)
`exceeded $23 billion. The promise to suppress AG competition – not the AG itself – is
`responsible for any ensuing consumer harm.
`
`
`In conclusion, this Report finds that, during the 180-day exclusivity period, competition
`from authorized generics lowers prices for consumers and lowers revenues for the independent
`
`12 FTC staff estimates that “pay-for-delay” arrangements, overall, cost American consumers $3.5 billion
`per year. FED. TRADE COMM’N, PAY-FOR-DELAY: HOW DRUG COMPANY PAY-OFFS COST
`CONSUMERS BILLIONS 8–10 (2010), http://www.ftc.gov/os/2010/01/100112 payfordelayrpt.pdf.
`13 See, e.g., CONG. BUDGET OFFICE, HOW INCREASED COMPETITION FROM GENERIC DRUGS HAS
`AFFECTED PRICES AND RETURNS IN THE PHARMACEUTICAL INDUSTRY 31 (1998),
`http://www.cbo.gov/ftpdocs/6xx/doc655/pharm.pdf. “No AG” agreements also deny consumers the
`benefit of price discounts from AG competition during the 180-day exclusivity period.
`14 Of the 39 agreements from FY 2004 to FY 2010, 24 were made between FY 2004 and FY 2009 (an
`average of four per year), while 15 were made in FY 2010. The 15 agreements in FY 2010 in which
`brand-name firms agreed not to introduce an AG were nearly 60% of the 26 agreements that year
`containing payments to a first-filer generic and a restriction on that firm’s ability to market its product.
`
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`

`generic competitor. Over the longer term, lower expected profits could affect a generic
`company’s decision to challenge a patent on products with low sales, and one company provided
`a few examples where it claimed the expectation of an authorized generic led it to reject or delay
`such a challenge. Overall, however, patent challenges, even on drugs with low sales, remain
`robust and, by most measures, have increased despite the prevalence of authorized generic
`competition. Moreover, as a consequence of an authorized generic’s significant negative impact
`on a generic’s revenues, some brand-name companies have used agreements not to launch an
`authorized generic as a way to compensate an independent generic in exchange for the generic’s
`agreement to delay its entry. The frequency of this practice and its profitability may make it an
`attractive way to structure a pay-for-delay settlement, a practice that causes substantial consumer
`harm.
`
`-vii-
`
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`

`000010
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`

`AUTHORIZED GENERIC DRUGS:
`SHORT-TERM EFFECTS AND LONG-TERM IMPACT
`———————
`A REPORT OF THE
`FEDERAL TRADE COMMISSION
`
`
`
`CHAPTER 1: INTRODUCTION ................................................................................................1
`I. THE BASIC REGULATORY FRAMEWORK AND THE HATCH-WAXMAN AMENDMENTS ........................... 2
`II. THE KEY ISSUES ADDRESSED IN THIS REPORT ..................................................................................... 4
`III. STUDY SCOPE AND DATA SOURCES .................................................................................................... 6
`IV. ORGANIZATION OF THE REPORT.......................................................................................................... 8
`CHAPTER 2: AN OVERVIEW OF AG MARKETING AND ITS RELATIONSHIP TO
`THE EXCLUSIVITY SYSTEM .................................................................................................11
`I. AG MARKETING: TRENDS AND INDUSTRY PRACTICES ........................................................................ 11
`A. The Scope and Time Course of AG Marketing ................................................................................ 11
`B. Brand and Generic Industry Involvement in Authorized Generics ................................................. 14
`1. Authorization of Generic Drugs by NDA-Holding Companies ................................................... 15
`2. Distribution of AGs: In-House Marketing and External Generic Partners ................................ 17
`II. AG MARKETING: RELATIONSHIP TO 180-DAY EXCLUSIVITY PERIODS AND PATENT CHALLENGES . 25
`A. AG Marketing During 180-Day Exclusivity Periods ....................................................................... 26
`B. AG Marketing Apart from 180-Day Exclusivity Periods and Patent Challenges ........................... 27
`III. CONCLUSION ..................................................................................................................................... 32
`CHAPTER 3: SHORT-TERM IMPACTS OF AUTHORIZED GENERICS: PRICE AND
`REVENUE EFFECTS DURING 180-DAY EXCLUSIVITY ..................................................33
`I. PRIOR STUDIES ..................................................................................................................................... 34
`II. DESCRIPTION OF THE DATA ................................................................................................................ 36
`III. THE EFFECT OF AUTHORIZED GENERIC COMPETITION DURING THE EXCLUSIVITY PERIOD ............ 38
`A. Market Prices of Generic Drugs ..................................................................................................... 40
`1. Generic Retail Market Prices ...................................................................................................... 41
`2. Generic Wholesale Market Prices ............................................................................................... 46
`3. Generic Firm Level Pricing Analysis .......................................................................................... 48
`B. Market Prices of Brand-Name Products ......................................................................................... 50
`1. Brand Retail Prices ..................................................................................................................... 50
`2. Brand Wholesale Prices .............................................................................................................. 52
`3. Investigating Lower Brand Prices During Exclusivity ................................................................ 54
`C. Wholesale Expenditures .................................................................................................................. 56
`1. Wholesale Revenues of ANDA-Generic Firms ............................................................................ 57
`2. Wholesale Revenues of the Brand-Name Product ....................................................................... 59
`3. Wholesale Revenues of Brand-Name Firms ................................................................................ 61
`IV. CONCLUSION ..................................................................................................................................... 63
`CHAPTER 4: THE MARKETING OF AUTHORIZED GENERICS: BRAND-NAME
`FIRMS’ OBJECTIVES AND STRATEGIES ...........................................................................65
`I. AUTHORIZED GENERICS AND REVENUE ENHANCEMENT .................................................................... 66
`A. The Use of Authorized Generics to Maintain a Revenue Stream .................................................... 66
`B. The Use of Brand-Name Discounting to Maintain a Revenue Stream ............................................ 69
`
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`II. AUTHORIZED GENERICS AND IMPACT ON GENERIC FIRMS’ INCENTIVES ........................................... 71
`III. EVIDENCE FROM BRAND MARKETING PRACTICES ............................................................................ 72
`A. Relationship to Exclusivity; Timing of Launch and Withdrawal ..................................................... 72
`B. Pricing, Market Share, and Profit-Splits ......................................................................................... 75
`IV. CONCLUSION ..................................................................................................................................... 77
`CHAPTER 5: THE MARKETING OF AUTHORIZED GENERICS: GENERIC FIRM
`PERCEPTIONS AND DECISION-MAKING ..........................................................................79
`I. THE IMPACT OF AGS ON GENERIC FIRM REVENUES AND PROFITS: GENERIC COMPANY CONCERNS
`AND RESPONSES ...................................................................................................................................... 80
`A. The Nature of Generic Company Concerns .................................................................................... 80
`B. Differing Generic Company Responses .......................................................................................... 83
`II. THE LONG-TERM IMPACT OF AGS ON GENERIC FIRM INCENTIVES TO BRING GENERIC PRODUCTS TO
`MARKET VIA PATENT CHALLENGES ....................................................................................................... 85
`A. Documents Suggesting an Impact on Generic Entry through Patent Challenges ........................... 86
`B. Documents Suggesting that Impacts of AGs on Generic Entry through Patent Challenges May Be
`Overstated ........................................................................................................................................ 89
`III. CONCLUSION ..................................................................................................................................... 92
`CHAPTER 6: LONG-TERM EFFECTS OF AUTHORIZED GENERICS: PRICE,
`REVENUE, AND BREAK-EVEN EFFECTS ...........................................................................93
`I. PRIOR STUDIES ..................................................................................................................................... 94
`II. DATA AND METHODOLOGICAL APPROACH ........................................................................................ 96
`III. MARKET PRICES OF GENERIC DRUGS ............................................................................................. 100
`A. Retail Prices .................................................................................................................................. 101
`B. Wholesale Prices ........................................................................................................................... 102
`IV. WHOLESALE EXPENDITURES ........................................................................................................... 103
`A. Evolution of Revenue Shares in Markets with and without AGs ................................................... 103
`B. Wholesale Expenditures on the First-Filer’s Product ................................................................... 105
`C. Wholesale Expenditures on The Brand-Name Firm’s Products ................................................... 107
`V. INCENTIVES TO FILE PARAGRAPH IV CHALLENGES ......................................................................... 109
`A. The Profit Calculation ................................................................................................................... 109
`B. Break-Even Analysis ..................................................................................................................... 112
`1. Markets without an AG .............................................................................................................. 112
`2. Markets with an AG ................................................................................................................... 113
`3. Effect on Threshold Probability of a Successful Challenge ...................................................... 115
`VI. CONCLUSION ................................................................................................................................... 118
`CHAPTER 7: ASSESSING THE IMPACT OF AG COMPETITION FROM PATENT
`CHALLENGE DATA ................................................................................................................121
`I. PATENT CHALLENGES BY SALES LEVEL ............................................................................................ 122
`A. Challenges to Patents on Low-Sales Drugs .................................................................................. 122
`B. Trends in Sales Levels of Drugs Subject to Challenge .................................................................. 125
`II. THE PREVALENCE OF PATENT CHALLENGES AND DRUGS SUBJECT TO PATENT CHALLENGES ....... 126
`A. ANDA Filings and Paragraph IV Certifications ........................................................................... 126
`B. Drugs Subject to ANDAs with First PIV and PIII Certifications .................................................. 128
`III. PATENT CHALLENGES LEADING TO SHARED EXCLUSIVITY: NEW CHEMICAL ENTITIES ................ 133
`IV. CONCLUSION ................................................................................................................................... 137
`
`
`
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`

`CHAPTER 8: THE USE OF AUTHORIZED