This project was completed by Intensity. Intensity joined Secretariat on February 1, 2023.

Background

Two generic drug companies participated in an “at-risk” launch of generic versions of a multi-billion dollar gastroesophageal reflux drug. The generic drug companies launched “at-risk” by selling product after receiving FDA marketing approval, but while claims of patent infringement were still pending. A previous jury found that the patent-in-suit was valid and infringed, making economic damages the central remaining issue in the case.

Our Analysis

Intensity calculated the profits that the branded drug company lost as a result of sales of generic versions of the branded drug. As part of its lost profits analysis, Intensity performed a reconstruction of a “but-for world” in which the infringement never occurred.

Reconstruction of the but-for world became an economic issue in the case due to the timing and complexity of marketplace events. The first generic company launched its product in large quantities, but stopped selling just days later. The second generic company waited to launch its generic product until the day after the branded company launched its own generic product. The first generic resumed sales of its product a number of months later. Intensity performed an analysis to quantify the economic effects of these marketplace events on lost sales and lost profits.

Our work involved quantification of the unit sales and prices that the branded company would have realized in the but-for world. The analysis included a determination of unit sales that were lost as a result of generic entry as well as additional unit sales that were made as result of the generic entry. Similarly, we performed an analysis of price erosion to determine the prices that the branded drug would have been sold at if competing generic versions had not been sold. We specifically examined the factors influencing price differences that occurred upon generic entry.

This project also involved an analysis of the economic impact of corporate structure and transfer pricing on lost profits.