Commentary on 'Effects of 'Authorized Generics' on Canadian Drug Prices

• Author: Aidan Hollis
• Pages: 311-315

311

Commentary on “Ef‌fects of ‘Authorized

Generics’ on Canadian Drug Prices”

Aidan Hollis1

Paul Grootendorst has written an excellent, clear study on the ef‌fects

of authorized generics (AGs) in the Canadian pharmaceutical ma r-

ket. e study of‌fers a few important insights. First, AGs reduce the

average price paid for a drug when they enter the market before an

independent generic (IG). Second, AGs have no signif‌icant i mpact on

prices once IGs have entered. A n implication of these two f‌indings is

that one need only consider the balance between the benef‌its of early

entry by AGs and the ef‌fect on the timing of generic entry in assessing

the net impact on prices. If AGs suf‌f‌iciently delay generic entry, then

their overall impact must be negative.

It is therefore important to understand why AGs mig ht delay gen-

eric entry. To do this, we need to understand the process of generic

entry. One of the most relevant features of the generic drug industr y

is the requirement to undertake patent challenges pursua nt to the Pat-

ented Medicines (Notice of Compliance) Regulations (or the PM (NOC)

Regulations). When a generic f‌irm claims, through a Notice of Allega-

tion, that the remaining patents on a given brand name drug are invalid,

it is likely to face very substantial litigation costs. If the generic is suc-

 Associate Professor, Depar tment of Economics, University of Calga ry.

 Canada, S.O.R./-.