April 8, 2025
ARC has prepared a brief which uses the results of a new research paper to estimate the historical and projected costs of pay-for-delay agreements on the federal government and individuals, as well as the impacts on premiums for private insurance coverage. The brief is based on innovative research from Keith Drake and Thomas G. McGuire, which used the stock price movement of brand drug companies after announcements of agreements with generic competitors to estimate the economic costs of “pay-for-delay” – a process by which generic entry to the market is delayed in exchange for compensation from the brand manufacturer. This work was funded by the Blue Cross Blue Shield Association.
Key ARC Findings:
- The impact to federal expenditures of pay-for-delay between 2014 and 2023 was potentially as high as $16.1 billion, or $1.6 billion annually.
- Over the coming decade (between 2024 and 2033), additional costs to the federal government could exceed $27 billion.
- Generic delays affect individuals as well; the impact on out-of-pocket expenditures between 2014 and 2023 exceeded $4.4 billion. Over the next 10 years, the impact on out-of-pocket expenditures may be as high as $5.3 billion.
- In addition to higher cost-sharing, delays in generic entry led to higher premiums for individuals with private coverage; over the past 10 years, total premiums for individuals with ESI, ACA Marketplace or other private coverage may have been as much as $12.2 billion higher. For the coming decade, this amount could be as high as $17.9 billion.
The brief can be viewed here: https://web.aresearch.com/wp-content/uploads/2025/04/Pay-for-Delay-Brief-2025.4.8.pdf