Ability to settle cases influences generic patent challenges, study finds
A white paper suggests that patent case settlements between originator pharmaceutical companies and their generic competitors may be beneficial to drug consumers.
It comes in the context of the US Federal Trade Commission attempting to limit certain settlements between brands and generics.
The study, written by leading economists at Compass Lexecon, was released on July 23. It shows that the ability to settle patent litigations may influence generic pharmaceutical companies’ decisions to challenge brand patents.
The authors of The Benefits of Patent Settlements: New Survey Evidence on Factors Affecting Generic Drug Investment set out to find evidence to inform policy debate on whether settling patent infringement cases benefits or harms drug consumers.
It was released ahead of the July 23 hearing of the Subcommittee on Antitrust, Competition Policy and Consumer Rights, which considered whether settlement options for generics pursuing patent challenges should be restricted.
The authors, Jonathan Orszag and Bret Dickey, surveyed 14 manufacturing members of the Generic Pharmaceutical Association (GPhA), which financially supported the study. Those members represent 85 percent of the US generics market.
They found that when determining which generic drugs to invest in, the ability to settle patent litigation was an important factor to consider.
“When patent litigation went to judgment, the generic respondent lost two out of every three times,” it says in the paper.
“Such evidence may suggest that branded patents were relatively strong, and where patents are strong, settlements with consideration are more likely to benefit consumers.”
The paper also reported that generic companies resolve 64 percent of patent suits by settlement.
“For the first time since 1957, spending on prescription drugs in America has dropped, largely due to the widespread availability and use of generic medicines,” said Ralph Neas, chief executive of GPhA.
“The Hatch-Waxman law encourages generic competition and works extraordinarily well, with generic medicines now comprising 84% of prescriptions dispensed. This paper offers more evidence of the wisdom of preserving the current system, including patent settlements with consideration. Limiting settlement options will actually drive down investment in generics and drive up the cost of medicine for patients.”
Jonathan Orszag said: “For too long, the policy debate has ignored how patent settlements with consideration affect incentives of brand and generic pharmaceutical manufacturers to develop critical medicines.
“Patent litigation is already expensive and risky. Restricting the options for settling patent litigation reduces the ability of generic manufacturers to settle these cases, and increases that cost and risk. This, in turn, lowers manufacturers’ incentives to bring generic drugs to market.”
Among its other findings, the paper noted that bringing a generic drug to market can cost up to $3,250,000.
Filing an Abbreviated New Drug Application with the US Food and Drug Administration, which is necessary for companies looking to market a generic version of a branded drug, can cost $250,000, while patent litigation costs can be anything between $2,000,000 and $5,250,000, the study said.
