Generics are increasing competition and lower prescription drug prices

Apr 20 2007

According to a new study by researchers at the Massachusetts Institute of Technology's (MIT) School of Management and Analysis Group Inc., there is no evidence that the recent increase in prevalence of authorized generics has resulted in delays in generic entry into the marketplace.

This report reinforces findings in a separate study that authorized generics increase competition and lower prices for consumers.

"This study and others show that authorized generics are increasing competition and helping lower prescription drug prices for patients, not harming competition," said Lori Reilly, PhRMA's vice president for policy and research. "As a result, proposals to restrict authorized generics would reduce consumer savings."

Authorized generics are distributed by a generic company or a subsidiary of a brand name pharmaceutical company with permission from the brand name company. An authorized generic can compete in the market during a certain period -- 180-day exclusivity period -- awarded to the first generic company that challenges a brand drug's patent by filing a paragraph IV certification.

The study by MIT Professor Ernst R. Berndt and Analysis Group researchers Richard Mortimer and Andrew Parece confirms the fact that the recent increase in authorized generic drugs has not reduced paragraph IV certification activity. As a result, the increasing prevalence of authorized generic drugs has not hurt the pocketbooks of American consumers. In fact, earlier research done by these authors and others found that consumers are likely to benefit from authorized generic entry due to lower generic prices during the 180-day market exclusivity period.

In the new study, Professor Berndt, along with other researchers, examined several detailed datasets on paragraph IV certifications from the Food and Drug Administration, PhRMA member companies and Paragraphfour.com to help reach their conclusions on the impact authorized generics have on patent challenges.

"The key findings in this report highlight the important role that authorized generics play in the overall U.S. healthcare system," said Reilly. "This study confirms that substantial incentives exist for generics to enter the market even when they face competition from authorized generics and authorized generics have not caused delays in generic entry."

For a copy of the full report, go to PhRMA's Web site at http://www.phrma.org/news_room/.