Delayed Generic Entry

Counsel for a branded pharmaceutical company retained Dr. Michael Keeley, a senior vice president of Cornerstone Research, to address class certification issues in two antitrust suits brought by classes of indirect purchasers—consumers and third-party payors.

Counsel for a branded pharmaceutical company retained Dr. Michael Keeley, a senior vice president of Cornerstone Research, to address class certification issues in two antitrust suits brought by classes of indirect purchasers—consumers and third-party payors. The suits alleged that an agreement between the branded and generic drug manufacturers was anticompetitive because it delayed the introduction of a lower-priced generic drug.

Dr. Keeley showed that determining the impact of the conduct would require individual inquiry because not all consumers would have benefited from generic entry.

For the consumer class action, Dr. Keeley showed that determining the impact of the conduct would require individual inquiry because not all consumers would have benefited from generic entry. First, not all consumers would have switched to the generic when it became available. Further, some consumers may have had the same co-payments for the branded and generic drugs. Others benefited from extensive sampling of the branded drug.

Dr. Keeley’s analysis also demonstrated that common evidence could not be used to assess the impact of the agreement on a class of third-party payors because at least some third-party payors would have paid more, not less, for the generic. Third-party payors’ costs for a drug are equal to the total price less any co-payment. For some third-party payors, the difference in co-payments between the brand and generic versions of the drug was larger than the difference in the total price, resulting in larger payments for the generic than the branded product. Whether a third-party payor’s cost for the generic drug would have been less than its cost for the branded drug would depend on the specific structure of the plan co-payments and thus individual inquiry would be required.