New Study Concludes that Authorized Generics Enhance Competition & Benefit Consumers

In a previous post, we reported on an assessment conducted by the Analysis Group, Inc. on the effects of authorized generics on paragraph IV patent certifications.  There, the authors concluded that “[t]here is no evidence to suggest that authorized generic entry causes delayed generic entry.” 

In a new study published in the May/June 2007 issue of Health Affairs, most of the same authors also conclude (not surprisingly) that authorized generics tend to enhance competition and work to the benefit of consumers.  According to the authors:

Although reliable long-run data are not yet available, we posit that authorized generic entry will disproportionately deter what otherwise would be unsuccessful paragraph IV certifications.  Even when a successful certification is deterred, generic entry is delayed by anticipated authorized generic entry only if all timely and successful certifications for a drug are deterred. In the absence of extensive data on paragraph IV filings, [there are] reasons why, in our judgment, anticipated authorized generic entry is unlikely to delay independent generic entry for most drugs and why any impact on consumer prices from delayed entry is likely to be small.

We also find that should anticipated authorized generic entry reduce the long-run number of generic entrants for a drug, it still might have little effect on long-run generic prices and shares. Our analysis of recent data demonstrates that additional generic entrants after the first four or five do not appear to significantly affect long-run generic-to-brand price ratios. Furthermore, although our analysis is preliminary, we find that 180-day exclusivity does not appear to lower long-run generic-to-brand price ratios or increase long-run generic penetration. Hence, any effect of authorized generics on the incentives created by 180-day exclusivity is unlikely to greatly affect consumers through delayed generic entry or higher long-run generic prices.

Although there is pending legislation in the U.S. Senate and House that would, if enacted, prohibit the marketing of authorized generics during a generic applicant’s 180-day exclusivity period, Congress has not yet included (and may not include) any such legislation as part of its omnibus FDA reform and user fee bill, the FDA Revitalization Act.  Instead, Congress may wait to see if there is a need for such legislation based on the results of a study of the use, and likely short- and long-term competitive effects, of authorized generics proposed by the Federal Trade Commission in March 2006.