Pay-for-delay (“PFD”) agreements, in which a brand-name pharmaceutical company agrees to pay a generic drug company to delay the release of the generic version of the brand-name drug, have been controversial and the subject of substantial litigation. The Federal Trade Commission has, generally, taken the position that PFD agreements are anti-competitive and harm consumers. But, those in favor of PFD agreement argue differently.
In an article for Law360, we empirically estimate brand-name firms’ incremental revenue resulting from delaying the entry of generic substitutes for their pharmaceutical products. Using a dataset of 65 drugs that were not involved in PFD agreements and 13 that were, we find that the brands’ total anticipated incremental revenue from delaying generic entry is $17.6 billion. We also find that delaying generic entry by a single year generates, on average, 3.7 times the brand-name drug’s annual revenue.
