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Authors

Jeremiah Helm

Abstract

Generic drugs play an important role in the American system of health care. Most anticipate that the entry of these drugs into the market will lower prices and thereby increase treatment options for consumers. To stimulate generic entry, the Food and Drug Administration currently offers a period of marketing exclusivity to the first firm that gains approval for a generic version of a branded drug. During this 180-day period, only two firms can sell versions of the drug: the original, branded drug maker and the first approved generic firm. After the period of exclusivity expires, other generic firms are free to enter the market. In this Comment, I question whether the 180-day period of generic exclusivity benefits society. Using prescription drug sales data collected by IMS Health for the antibiotic Augmentin, I conduct an empirical analysis that suggests that the 180-day period of exclusivity is unnecessary to induce generic entry into a blockbuster drug market, and is thus potentially harmful to consumers. This Comment first describes the legal background surrounding the entry of generic drugs into the market. It then explains the statutory exemption that makes Augmentin an especially good model system for considering the need for the generic exclusivity incentive. Finally, this Comment analyzes generic and branded sales data to determine the effect of generic entry on the price of the branded drug and, more importantly, the average price paid by consumers.

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