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Estimating Brand Drugs’ Payoff from Pay-for-Delay Deals

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Listed:
  • Atanu Saha

    (StoneTurn)

  • Yong Xu

    (StoneTurn)

Abstract

The objective of this paper is to develop an analytical and estimation framework to empirically quantify a brand drug’s incremental revenue from delayed generic entry pay-for-delay (“PFD”) deal. The paper’s dataset comprises 78 branded drugs and monthly data from January 2009 through March 2020. Consistent with the predictions of the analytical model, we find that relative to non-PFDs, PFD drugs have significantly higher revenue growth rates prior to generic entry. For the 13 PFD drugs in our sample, we estimate that the brands’ total incremental revenue from delaying generic entry ranges between $17.6 billion and $22.7 billion. We also show that delaying generic entry by a single year generates more than four times the brand’s annual revenue.

Suggested Citation

  • Atanu Saha & Yong Xu, 2023. "Estimating Brand Drugs’ Payoff from Pay-for-Delay Deals," Journal of Industry, Competition and Trade, Springer, vol. 23(1), pages 81-99, June.
    • Handle: RePEc:kap:jincot:v:23:y:2023:i:1:d:10.1007_s10842-023-00398-y
    DOI: 10.1007/s10842-023-00398-y
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    References listed on IDEAS

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    1. Farasat A.S. Bokhari, 2013. "What Is The Price Of Pay-To-Delay Deals?," Journal of Competition Law and Economics, Oxford University Press, vol. 9(3), pages 739-753.
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    3. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    4. Lakdawalla, Darius & Sood, Neeraj, 2013. "Health insurance as a two-part pricing contract," Journal of Public Economics, Elsevier, vol. 102(C), pages 1-12.
    5. Ernst R. Berndt & Rena M. Conti & Stephen J. Murphy, 2017. "The Landscape of US Generic Prescription Drug Markets, 2004-2016," NBER Working Papers 23640, National Bureau of Economic Research, Inc.
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