Restricting options for brand-generic patent settlements would increase cost, risk for generic patent challenges, white paper finds

WASHINGTON — Decisions on whether to bring new generic drugs to market depend significantly on companies' ability to settle patent lawsuits filed by branded drug companies, according to a new white paper.

The white paper, by Compass Lexecon EVP Bret Dickey and senior managing director Jonathan Orszag, includes an economic analysis and survey of 14 member companies of generics industry trade group the Generic Pharmaceutical Association, which together represent 85% of the generics market. Orszag was also an economic policy adviser on former president Bill Clinton's National Economic Council.

Among the paper's findings, generic drug companies report resolving 64% of patent suits by settlement, but losing two out of every three times they pursue litigation to judgment by the court. Also, the ability to settle patent litigation is an important factor in determining whether to invest in bringing a generic drug to market, and the most important factor determining whether a company files a patent challenge is the likelihood of a first-filer opportunity; the first company to file a completed approval application with the Food and Drug Administration gets 180 days in which to compete directly with the branded drug.

"For too long, the policy debate has ignored how patent settlements with consideration affect incentives of brand and generic pharmaceutical manufacturers to develop critical medicines," Orszag said. "Patent litigation is already expensive and risky. Restricting the options for settling patent litigation reduces the ability of generic manufacturers to settle these cases and increases that cost and risk. This, in turn, lowers manufacturers' incentives to bring generic drugs to market."