What is the Value of Authorised Generic Agreements? Assessments on the French Market

Abstract

The worldwide generic market should keep on growing at the expense of brand-name companies and reach sales of US$97bn, in 2010. To resist this increasing competitive pressure and to maintain a slice of the market, brand-name companies may negotiate with generic companies to postpone the launch of their competitive products or they may license their own generic products to competitor generic companies. In the USA, these so-called ‘authorised generics’ have generated substantial profits for brand-name companies and to their generic partners, provided however that they are launched before patent expiry during an exclusivity period. In Europe, there are no legal exclusivity periods granted to generic companies that can challenge original brands, and the strategic and financial values relative to this strategy are not well established. This paper proposes a specific approach to assess the benefits of authorised generic deals for both the brand-name companies and their generic partners. The application of this approach on several authorised generic deals carried out in France shows that the duration of the exclusivity period, the number of generic partners involved, and their relative competitive position are the most important success factors. In addition, it appears that brand-name companies could have a financial interest to propose, for their ‘easy-to-substitute’ original brands, authorised generic licenses to all generic companies. In such a situation, generic partners will benefit from a guaranteed market access and a product identical to the original brand while avoiding risks of patent infringement.