1. Antitrust in the Pharmaceutical Industry: An Introduction to Brand-Generic Competition Scott Hemphill New York State Office of the Attorney General George Mason University May 3, 2012

2. Source: Frank and Hartman (2009) Dollars per Extended Unit Average price of fluoxetine before and after generic entry GENERIC ENTRY LOWERS PRICES

3. Effective market life and nominal patent term by drug, for drugs with challenges Source: Hemphill and Sampat, Evergreening, Patent Challenges, and Effective Market Life in Pharmaceuticals, Journal of Health Economics (2012) Note: NMEs with first generic entry 2001-2010 EVEN WITH A CHALLENGE, BRAND-NAME DRUGS ENJOY SUBSTANTIAL EXCLUSIVITY

4. Brand wins 34Active ingredient (AI) patent 34Non-AI patent Outcome by patent type Generic wins 5 57 Source: Hemphill, Sampat and Tilipman (working paper 2012) Notes: drugs first eligible for challenge 2000-2010; excludes pending cases LITIGATION OUTCOMES VARY BY PATENT TYPE

5. brand only brand + generic Entry Patent expiresLitigation ends brand + generic brand only Litigation Settlement PAYMENT ALTERS THE SETTLEMENT BARGAIN $ $$ $$$ Source: Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, NYU Law Review (2006)

6. Brand wins 34Active ingredient (AI) patent 34Non-AI patent Outcome by patent type Generic wins 5 57 Settles 28 [40%] 133 [60%] Source: Hemphill, Sampat and Tilipman (working paper 2012) Notes: drugs first eligible for challenge 2000-2010; excludes pending cases FOR WEAK PATENTS, THE PAY-FOR-DELAY INCENTIVE IS STRONGER

7. Source: Hemphill, Sampat and Tilipman (working paper 2012) Notes: drugs first eligible for challenge 2000-2010; excludes pending cases

8. brand only brand + generic Competition Litigation Settlement Source: Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, NYU Law Review (2006) SETTLEMENT WITH “RETAINED EXCLUSIVITY” PRESENTS A FURTHER HARM

9. CONCLUSIONS Generic challenges shorten brand exclusivity, but only somewhat Patent type matters: “non-AI” patents are where the action is The 180-day bounty matters: its effect on incentives is central to any realistic theory of settlement