The Anticompetitive Effects of Common Ownership: The Case of Paragraph Ⅳ Generic Entry

摘要

We examine how common institutional owners of natural competitors affect the product-market outcome in the pharmaceutical industry. Such a pre-entry setting allows us to directly regress anticompetitive product-market outcomes on institutional ownership. We analyze a sample of patent infringement lawsuits filed by brand-name drug manufacturers against generic manufacturers that filed Paragraph IV applications to the FDA. Paragraph IV allows generic manufacturers to produce bioequivalent drugs before the expiration of patents covering the branded product at issue. We find institutional horizontal shareholdings, measured by the weight of top generic shareholders' ownership in the brand-name manufacturer relative to their ownership in the generic entrant, increase the likelihood of the two litigants entering into a settlement agreement in which the brand-name drug manufacturer often pays the generic manufacturer for the purpose of delaying entry.