Horizontal Shareholdings and Paragraph IV Generic Entry in the U.S. Pharmaceutical Industry

AuthorJin Xie
Published date01 March 2021
Date01 March 2021
DOIhttp://doi.org/10.1177/0003603X20985797
Subject MatterArticles
Article
Horizontal Shareholdings
and Paragraph IV Generic
Entry in the U.S.
Pharmaceutical Industry
Jin Xie*
Abstract
The Federal Trade Commission frequently files complaints against “pay-for-delay” settlements
between brand-name pharmaceutical companies and generic-drug manufacturers, the latter of which
challenge the monopoly status of patent-protected drugs. I document than when the top 20 generic
shareholders have more substantial financial interests in the brand, then the likelihood that the brand
enters into a settlement agreement with the first generic to challenge the brand goes up. The result of
such a settlement is a payment from brand to generic, in exchange for the generic’s delayed entry. Only
after the first generic’s entry, a 180-day period of marketing exclusivity for that particular generic
starts. Other generics can only market their drugs after that period expires. As such, the settlement
between brand and the first generic extends the brand’s monopoly position. I conclude that horizontal
shareholdings facilitate coordination between brand-name patent holders and generic challengers in
response to the threat of entry.
Keywords
institutional horizontal shareholdings, pharmaceutical industry, patent infringement lawsuit, settlement
agreement, antitrust
Introduction
In this article, I show institutional horizontal shareholdings (i.e., a group of institutional investors that
hold large stakes in competitors) are associated with product–market coordination between compet-
itors.
1
This is different from earlier work that has shown links between common ownership and
* The Chinese University of Hong Kong, Hong Kong
Corresponding Author:
Jin Xie, The Chinese University of Hong Kong, Central Ave, Hong Kong.
Email: xiejin@cuhk.edu.hk
1. “Horizontal shareholdings” is used to describe the situation in which a common set of investors own significant shares in
corporations that are already horizontal competitors in a product market. See Einer Elhauge, Horizontal Shareholdings, 129
HARV.LAW REV. 1267 (2016). [hereinafter Elhauge, Horizontal Shareholdings].
The Antitrust Bulletin
2021, Vol. 66(1) 100–112
ªThe Author(s) 2021
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DOI: 10.1177/0003603X20985797
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