In the US, the first generic competitor to a brand-name drug can be granted a 180 day exclusivity period during which no other generic company will receive approval to sell its product.  However, brand-name companies may introduce their own authorised generic drugs during the exclusivity period.

It has become increasingly common for brand-name companies to start marketing authorised generics at the same time a generic firm commences its exclusivity period.  The US Federal Trade Commission (“FTC”) has recently reported that:

  • when brand-name companies introduce an authorised generic of their brand name drug, it can reduce both retail and wholesale prices;
  • authorised generics have a substantial effect on the revenues of competing generic companies;
  • lower expected profits could affect a generic company’s decision to challenge patents on products with low sales.  In spite of this, however, patent challenges by generic competitors remains robust; and
  • there is evidence that some brand-companies may have used agreements not to launch an authorised generic as a way to compensate would-be generic competitors for delaying entry into the market.

The FTC previously reported a 60% year on year increase in the number of deals where manufacturers of branded products settled (with payment) patent disputes with generic challengers and delayed the introduction of lower-cost generic medicines.  The FTC found that settlements that included a payment delayed generic entry by, on average, 17 months as compared against settlements that did not include a payment.  See our previous alert on the competition implications of pay-for-delay agreements.

According to an FTC report released on 25 October 2011, the trend for pay-for-delay settlements has continued during the 2011 fiscal year.