On 3 September 2010, the Competition Committee of the Organization for Economic Cooperation and Development (OECD) published a summary of its October 2009 roundtable discussion on generic pharmaceuticals. The report provides a helpful overview of the key issues concerning competition between generic and branded products, as well as the effect on competition of agreements to delay the entry of generics on the market. The report also contains the written submissions of the participating countries and the EU on the subject.
The following key points were expressed during the OECD roundtable discussion.
- Competition between branded and generic pharmaceutical manufacturers can provide consumers with substantial savings. Although the actual effect of competition from generics varies substantially between jurisdictions, depending on the legislative framework and regulatory regime in place, there was no evidence that generic entry has a negative effect on consumers in pharmaceutical markets.
- The use of incentives is central to encouraging increased generic entry — for example, improving distribution methods for generic pharmaceuticals, and encouraging doctors to prescribe and pharmacists to dispense the generic version of a product will spur generic entry.
- The strategic use by brand name manufacturers of so-called "reverse payments" to keep generics from entering the market can harm consumers and cause significant welfare losses, which can be many multiples of the original payment from the branded firm to the generic firm.
- Brand name manufacturers are also adopting other strategies designed to prevent generic entry, including the sale of "authorized generics" (where a generic version of a branded drug is issued by the brand name manufacturer) and "product hopping" (where brand name manufacturers introduce new patented products that have minor or no substantive benefits as soon as generic entry is imminent).
- The Competition Committee noted that the benefits of generic competition should be balanced against the need to incentivize innovation and the continued investment in the development of new drugs.
The above conclusions are consistent with those expressed by antitrust enforcers at the FTC. Note, however, that there is considerable debate about whether strategies involving so-called "reverse payments," product-hopping and authorized generics are anti-competitive, and where they have been challenged, the enforcers have met with mixed success.