Indiana Health Law Review
Volume XXI 2024 Number 1

NOTES

INCENTIVIZING DRUG AFFORDABILITY: WILDCARD

EXCLUSIVITY VOUCHERS

THOMAS ABRAMS*

I. INTRODUCTION

The cost of medicine frustrates most of society—especially patients,
lawmakers, and scientists—and will continue to frustrate far into the future.
Inventing a chemical or biologic capable of improving or saving life is not cheap,
to be sure. Risky private investment is incentivized by the windfall potential
created by patents and monopoly prices. Monopoly prices, among other factors
outside the scope of this Note, contribute to the inability of many patients to
afford and access medically necessary treatments. When patents expire, generic
substitutes drive down prices. However, generic access can be unnecessarily
delayed when monopolies persist beyond patent expiration. When generic
availability is inappropriately delayed, patients and society are left paying
gratuitous multiples of the break-even cost of their medicine, long after inventors
have recouped their initial investment and turned a profit.

II. BACKGROUND & OVERVIEW

To appreciate how reduced generic access translates to higher costs and
poorer health outcomes, one must understand the relationship between innovators
and generic manufacturers. This understanding can then be applied to examine
price-lowering policies. Rather than “pushing” low prices with more expensive
red tape, new policies should “pull” prices lower by incentivizing price-lowering
behavior. The stick is exhausted, and modern policies should explore the carrot.

A. Innovative Versus Generic Medicine

Innovator pharmaceutical companies and generic pharmaceutical companies
appear similar at first glance. Indeed, the Food and Drug Administration (“FDA”)
requires generic medicine to be manufactured with the same (1) active/key
ingredient, (2) strength, (3) dosage form (e.g., tablet, capsule, liquid), and (4)

* J.D. Candidate, 2024, Indiana University Robert H. McKinney School of Law; B.S.,

2021, University of Dayton. A special thank you to Kurt Karst, Professor Aila Hoss, Jake Butz, and

IHLR colleagues for inspiring and supporting this Note.



122 INDIANA HEALTH LAW REVIEW [Vol. 21:121

route of administration (e.g., oral, topical, injectable) as the brand-name.1  The
innovator/brand-name and generic sectors are differentiated less by the substance
of their drugs and more by their business models, strategies, operations, goals,
and challenges.

Innovators invent and patent medicines, which are marketed exclusively by
the patent holder during the patent(s) life. Generic firms target weak patents or
off-patent drugs, copy the formula, and sell a “generic” form of the innovator’s
medicine at a discount. Thus, patent expiration or invalidation results in
competition, lower prices, and higher access as generics and innovators market
interchangeable products to the same patients. Although generics rely on
innovators to invent the next product, short-term success can be mutually
exclusive when the two share a market. 

As innovators’ patents age, generic suitor(s) prepare to launch—which may
be done “at-risk” (i.e., before the innovator’s patent expires) if the generic firm
believes a patent is invalid—a discounted, interchangeable version of the original
drug.  At this stage, the Hatch-Waxman process (to be discussed) for generic
entry draws the parties into negotiations. Sometimes, and particularly beneficial
to patients struggling with affordability, the parties enter a settlement to allow
generic entry prior to patent expiration. 

In its study of generic entry prior to patent expiration, the Federal Trade
Commission (“FTC”) identified that “in 7 of the 20 final settlements, the brand-
name company granted a license to the generic applicant to use the patents that
cover the brand-name drug product prior to patent expiration so that the generic
applicant could market under its [abbreviated new drug application]” (“ANDA”).2

Another FTC study showed opposite outcomes, where among 218 settlement
agreements, “66 final agreements involved some form of compensation from the
brand to the generic combined with a delay in generic entry.”3 While not in the
majority, these 66 agreements represent “pay-for-delay”—a concerning tactic
leveraged by some patent holders to delay generic competition and prop up
monopolies.4 As a result, patients “miss out on generic prices that can be as much
as 90% less than brand prices. For example, brand-name medication that costs
$300 per month might be sold as a generic for as little as $30 per month.”5

Regardless of who (e.g., patient, insurer, taxpayer, public program) pays what
“price” (e.g., copays, insurance premiums, list price), the difference between
brand and generic price is not small.

1. U.S. FOOD & DRUG ADMIN., GENERIC DRUGS: OVERVIEW AND BASICS (2017),

https://www.fda.gov/drugs/generic-drugs/overview-basics [https://perma.cc/ZF5N-N948].

2. U.S. Fed. Trade Comm’n, Generic Drug Entry Prior to Patent Expiration: An FTC Study,

25 (2002), https://www.ftc.gov/reports/generic-drug-entry-prior-patent-expiration-ftc-study

[https://perma.cc/J5V9-9X8R].

3. U.S. Fed. Trade Comm’n, Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers

Billions, 4 (2010), https://www.ftc.gov/reports/pay-delay-how-drug-company-pay-offs-cost-

consumers-billions-federal-trade-commission-staff-study [https://perma.cc/MZ9E-DXR2].

4. Id. 

5. Id. at 1. 



2024] INCENTIVIZING DRUG AFFORDABILITY 123

B. The Problem: Price & Health Outcomes

The consequence of poor generic access is not just monetary. In the U.S., 8%
of adults report worsening health conditions correlated with their inability to
afford prescriptions.6 According to the Kaiser Family Foundation, 29% of U.S.
adults forego medicine because of the cost. Nearly 30% of Americans are
skipping doses, cutting pills in half, or not filling prescriptions because of the
cost.7 Approximately 8% of U.S. adults reported worsening health after skipping
medication.8 The figure below illustrates where affordability concerns are
especially potent.

Figure 19

C. Roadmap

Although approaches to delay generic entry vary in form, this Note uses
“pay-for-delay” to refer to the various forms collectively. This Note explains the
problem of pay-for-delay and the difficulty of solving it before proposing a low-
friction incentive program as a solution. By presenting attractive alternatives to
companies that would otherwise extend monopolies, a “wildcard exclusivity”

6. KAISER FAM. FOUND., Poll: Nearly 1 in 4 Americans Taking Prescription Drugs Say It’s

Difficult to Afford Their Medicines, including Larger Shares Among Those with Health Issues, with

Low Incomes and Nearing Medicare Age (Mar. 2019), https://www.kff.org/health-costs/press-

release/poll-nearly-1-in-4-americans-taking-prescription-drugs-say-its-difficult-to-afford-

medicines-including-larger-shares-with-low-incomes/ [https://perma.cc/BSU2-A3RB]. 

7. Id. 

8. Id.

9. Id. 



124 INDIANA HEALTH LAW REVIEW [Vol. 21:121

system would simultaneously reward companies that facilitate drug affordability,
save patient and public dollars, and improve health outcomes. This Note
embraces one promising incentive, but other incentives outside the scope of this
Note—such as FDA user fee waivers and tax credits—could be incorporated into
a more dynamic incentive package. 

Each year, pay-for-delay saddles the U.S. healthcare system with billions of
dollars in avoidable cost.10 The most conservative estimated annual burden is $3.5
billion while more inclusive estimates exceed $37 billion.11 Based on six different
methodologies, a study by Robin Feldman calculated an average burden of $19.2
billion, or about 7% of average annual U.S. drug spending.12 In deriving these
empirical estimates, Feldman analyzed historical pay-for-delay settlements and
determined the length of delay.13 Then, the eventual generic price—what
consumers would have paid but for the pay-for-delay settlement—was subtracted
from the former monopoly price.14 “This revealed the cost incurred by consumers
as a result of the improper extension of the brand’s monopoly.”15 Essentially, the
“burden” refers to the difference between an inappropriately preserved monopoly
price and the discounted generic price that society would enjoy but for pay-for-
delay.

The portfolio of attempts—historic and proposed—to reach the pay-for-delay
angle of drug affordability consists largely of nominal progress and defeat. In
part, this is due to a plethora of legally defensible practices that, with the right
spin, circumvent existing policy. Owing to this environment and respecting the
objectives of all stakeholders, this Note explores two low-friction, nonpunitive
incentive structures: (1) the FDA’s priority review voucher program (“PRV”),
and (2) wildcard exclusivity vouchers (“wildcard”). The proposed PRV incentive
would reward innovator companies that choose to facilitate price reductions
rather than delay generic entry. Specifically, the FDA would issue PRVs to firms
that facilitate generic entry or otherwise facilitate price reductions. Such a
program would reduce drug prices, improve patient access to medicine, and
catalyze competition within the pharmaceutical industry, all while respecting the
economic and capitalistic interests of innovator companies. Unfortunately, the
PRV proposal gives way to economic and efficiency concerns. Fortunately, the
wildcard proposal is unthreatened by those concerns affecting the PRV proposal.
Offering a transferable market exclusivity voucher—a wildcard—to firms that
invite generic competition or unilaterally decrease prices can induce lower, pro-
patient pricing and grow generic competition while rewarding innovators. This
Note proposes that Congress, through an amendment to the Food Drug and

10. Robin C. Feldman, The Price Tag of “Pay-for-Delay”, 23 COLUM. SCI. & TECH. L. REV.

1, 32-33 (2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3846484 [https://perma.cc/

5FTM-JDZQ].

11. Id.

12. Id.

13. Id. at 17.

14. Id.

15. Id.



2024] INCENTIVIZING DRUG AFFORDABILITY 125

Cosmetic Act (“FDCA”), introduce a carefully tempered wildcard exclusivity
incentive program. 

This Note first describes the characteristics and differences between two
important industry participants, generic companies and innovator companies, to
reveal the fundamental conflict between the two groups.  Next, the Hatch-
Waxman Act is discussed to illustrate the process of bringing a generic drug to
market and to introduce the issue of delaying generic entry, or “pay-for- delay.”
The classic form of pay-for-delay—the reverse payment settlement agreement—is
described and later expounded upon by a discussion of FTC v. Actavis, wherein
the Supreme Court addressed reverse payment settlement agreements. The
increasingly nuanced forms of delaying generic entry which emerged in the wake
of Actavis are then described, leading into analysis of existing and proposed
enforcement mechanisms and why these often fail. The novel incentive program
at the heart of this Note is then introduced and analyzed with a discussion of why
it is advantageous relative to other proposals. This Note concludes by
summarizing the advantages of the proposed wildcard incentive, and how patients
and the U.S. healthcare system can benefit through its adoption.

III. INDUSTRY PARTICIPANTS

For the purposes of this Note, drug industry participants can be divided into
innovator companies and generic companies. Both create value for patients and
the healthcare system in different ways. Despite sharing a market and selling an
interchangeable product, they lack operational and strategic similarities and face
different challenges. In the high-stakes world of pharmaceuticals, generics and
innovators often clash and become distracted from their societal value
propositions (the value proposition of an innovator could be inventing medicine,
while that of a generic could be lowering the price medicine). When innovators
and generics clash and stray far from their purposes, patients and payors are
caught in the crossfire and suffer from higher prices and stifled access. 

A. Innovator Companies

The first group to discuss is innovator companies, or companies that invest
in research and development to invent, patent, and bring to market new medicines
under the company’s brand name. Familiar names falling into this “innovator”
category include Abbvie, Merck & Co., Bristol Myers Squibb, and a host of
others. 

Although this Note concerns private innovators, the indispensable role of
public contributions cannot go uncredited. The National Institutes of Health
(“NIH”) contributed over $100 billion dollars in grant funding to research
associated with all 210 drugs approved by the FDA between 2010–2016.16 By
building the early foundations in various treatment areas, publicly funded

16. Ekaterina Galkina Cleary et al., Contribution of NIH Funding to new drug approvals

2010-2016, PROCEEDINGS OF THE NAT’L ACAD. OF SCI. (2018),  https://pubmed.ncbi.nlm.nih.

gov/29440428/ [https://perma.cc/6LPS-RRX3].



126 INDIANA HEALTH LAW REVIEW [Vol. 21:121

discoveries often precede and inspire eventual private sponsorship of related drug
development programs.17 

In the private sector’s quest for new medicine, innovators attempt to invent,
patent, and steer new medicines from labs to patients. With FDA approval,
innovators can market their invention as a prescription drug under its brand name.
Because new drugs are protected by patents, their inventors are entitled to a legal
monopoly on the drug.18 Patents are usually filed early in the development
process, allowing much of the patent’s exclusivity period to lapse while the drug
is still in the lab, clinical trials, or FDA review processes. Therefore, despite
patents entitling the inventor to twenty years of protection, most drugs reach the
market with only seven to ten years of patent life remaining.19 Factoring in capital
costs and expenditures on drugs that fail to reach the market—only 12% of drugs
entering clinical trials ultimately reach the market—the cost of successfully
developing one new drug can eclipse one or two billion dollars.20 Once costs and
risks are overcome and a new drug is marketed, its inventors benefit from a
monopoly for the remainder of the patent life. As patents approach expiration, the
other group of industry participants relevant to this Note enters the
equation—generic companies.

B. Generic Companies

Rather than inventing medicine, generic companies serve a different
function—price control through competition. Examples of popular generic
companies include Teva, Viatris, Dr. Reddy’s, and Fresenius Kabi. When patents
on the innovator’s medicine expire, generic companies replicate the formula, seek
FDA approval, and sell approved generic versions of brand-name drugs at
significant discounts. Unburdened by the level of research and development
expense shouldered by innovator companies, generic companies can survive on
small profit margins—this dynamic allows generic companies to sell drugs at
large discounts. 

The first generic usually enters the brand name product’s market at a discount
of approximately 20%.21 As more competitors enter the post-patent market, the
generic discount against the brand price grows to 85%, on average.22 By offering

17. Id.

18. F.T.C. v. Actavis, Inc., 570 U.S. 136, 148 (2013).

19. Jan Berger et al., How Drug Life-Cycle Management Patent Strategies May Impact

Formulary Management, 22 AM. J. MANAG. CARE S487, S489 (2016), https://pubmed.ncbi.nlm.

nih.gov/28719222/ [https://perma.cc/2DBV-256P].

20. Cong. Budget Off., 57025, RESEARCH AND DEVELOPMENT IN THE PHARMACEUTICAL

INDUSTRY 2, 14, 17 (Apr. 2021), https://www.cbo.gov/publication/57126 [https://perma.cc/M4T3-

LT72].

21. Robin Feldman & Evan Frondorf, Drug Wars: A New Generation of Generic

Pharmaceutical Delay, 53 HARV. J. LEGIS. 499, 500-501 (2016), https://papers.ssrn.com/sol3/

papers.cfm?abstract_id=2659308# [https://perma.cc/5D83-AGTH].

22. U.S. FOOD & DRUG ADMIN., Generic Drug Facts, https://www.fda.gov/drugs/generic-



2024] INCENTIVIZING DRUG AFFORDABILITY 127

lower prices and making medicine more affordable, generic drug makers create
savings and increase access to medicine. 

More than 10,000 generic drugs have been approved, accounting for 90% of
prescriptions filled in the United States.23 Despite nine out of ten prescriptions
being filled by generic drugs, generics are only responsible for 18% of drug
spending—a testament to the ability of generics to save money (i.e., 90% of
volume, but only 18% of cost).24 In 2020, generics were responsible for $338
billion in savings.25 By avoiding the risk and cost of developing new medicine,
generics offer the same benefit at a reduced priced, saving the healthcare system
billions of dollars annually.

C. Recap: Innovators & Generics

Innovator and generic companies each create essential value in different
ways. Innovators create new medicines, while generic companies make those
medicines cheaper and more accessible. When generics enter the market,
innovators lose pricing power and sales volume. Therefore, it is often in the
innovator’s best interest to delay generic competition. Delaying generic entry is
a way to maximize profits and fund new inventions. Sometimes delaying generic
entry is the difference between solvency and bankruptcy for a firm with one or
few marketable products. However, if financial health is achievable through more
certain means, the utility of pay-for-delay as a business strategy is reduced. Much
like a bird in the hand that is worth more than two in the bush, the certainty of a
valuable wildcard on the balance sheet can outweigh the pursuit of future
monopoly sales, the value of which must be discounted by the uncertainty, cost
of litigation, and potential for antitrust liability. 

IV. HATCH-WAXMAN & PAY-FOR-DELAY

In 1984, Congress enacted the Drug Price Competition and Patent Term
Restoration Act, better known as the Hatch-Waxman Act.26 Hatch-Waxman
increased drug affordability by adding efficiency to the process by which generic
drugs enter the market.27 Prior to Hatch-Waxman, 19% of prescriptions were
filled with generic drugs and 35% of top-selling drugs faced generic competition
following patent expirations.28 Today, 90% of prescriptions are filled with generic

drugs/generic-drug-facts [https://perma.cc/2XNA-7WTZ] (last updated Nov. 2021).

23. U.S. FOOD & DRUG ADMIN., OFFICE OF GENERIC DRUGS: 2021 ANNUAL REPORT 2, 9

(2022), https://www.fda.gov/drugs/generic-drugs/office-generic-drugs-2021-annual-report

[https://perma.cc/7WKG-4BYC].

24. Id. at 2.

25. Id.

26. 21 U.S.C. § 355 (2022).

27. What is Hatch-Waxman, PHRMA (2018), https://phrma.org/resource-center/Topics/Cost-

and-Value/What-is-Hatch-Waxman [https://perma.cc/U7LH-5GSJ].

28. Id. 

https://perma.cc/U7LH-5GSJ


128 INDIANA HEALTH LAW REVIEW [Vol. 21:121

drugs and over 80% of brand drugs face generic competition.29 Hatch-Waxman
achieved these improvements by increasing the efficiency and profitability of
bringing a generic to market. 

Previously, the use of patented inventions to develop drugs, even if not
marketed, constituted infringement.30 Because generic development and approval
processes require years of work, this outdated treatment of generic development
effectively extended patent protections. Hatch-Waxman changed this, stating “it
shall not be an act of infringement” to use a patented invention in the
development and submission of information under Federal drug law. 31 This
efficiency, with others including the Abbreviated New Drug Application,32 ease
and expedite generic competition. 

Regarding profitability, Hatch-Waxman incentivizes generic competition by
rewarding the first company to offer a generic alternative to an existing drug with
a 180-day exclusivity period.33 This exclusivity period increases generic
profitability by allowing the generic to compete with the brand company alone
for 180 days, rather than competing with other generic competitors in addition to
the brand company. In other words, the fastest generic company gets to go one-
on-one with the brand company for six months before more generic competition
enters the market.

Acutely designed to affect pressure points within the market, Hatch-Waxman
brought about greater savings and greater access for patients. Competition
increased while prices fell.34 Between 2009 and 2019, generic drugs were
estimated to save the U.S. healthcare system over two trillion dollars.35 

Nevertheless, billions in would-be Hatch-Waxman savings go unrealized as
some companies avoid generic pressure and maintain monopoly-level prices.36

Patentees (patent holders) may anticipate the impending consequences of patent
expiration and stall generic entry with a variety of legal maneuvers. The “reverse
payment settlement agreement”—under anti-competitive circumstances—is the
original form of pay-for-delay and an unintended byproduct of the Hatch-
Waxman model. Anti-competitive reverse payment settlement agreements remain
emblematic of “pay-for-delay,” but the phrase has evolved into a more general
reference to the tactical delay of competition. 

A. Hatch-Waxman’s Abbreviated New Drug Application Pathway

Hatch-Waxman promotes competition by helping generic manufacturers
reach the market faster through Abbreviated New Drug Applications

29. Id.

30. Roche Prod., Inc. v. Bolar Pharm. Co., 733 F.2d 858 (Fed. Cir. 1984).

31. 35 U.S.C. § 271(e)(1).

32. 21 U.S.C. § 355(j) (2022).

33. Id.

34. Feldman & Frondorf, supra note 21, at 500-03.

35. Generic Drug Facts, supra note 22.

36. Feldman, supra note 10, at 32.



2024] INCENTIVIZING DRUG AFFORDABILITY 129

(“ANDA”).37 ANDAs may be submitted by a generic regardless of an innovator’s
patent protection through a “paragraph IV certification” in which the generic
asserts that existing patents are either invalid or would not be infringed by the
generic product.38 This allows generic companies to begin developing generic
alternatives before the innovator’s patents expire.

When a paragraph IV certification is filed, the certifying generic company
must notify the implicated brand-name company within 20 days of filing the
certification.39 After receiving notice of the paragraph IV certification asserting
the invalidity or non-infringement of the patent-holding, brand-name company’s
patent(s), the brand-name company initiates a lawsuit against the generic
company for patent infringement. This infringement right of action is preemptive
in nature, granted to brand-name companies even though the alleged infringement
is yet to occur, and damages are still prospective.40 By allowing the generic firm
to provoke the brand firm into litigation before the generic actually commits any
alleged infringement, both parties benefit from greater efficiency and
predictability. 

The filing of the lawsuit by the plaintiff-innovator against the defendant-
generic in response to the paragraph IV certification triggers a “stay period,”
during which time the FDA will suspend review of the ANDA for 30 months or
until litigation is resolved.41 At this juncture, the innovator can either (1) litigate
and attempt to uphold the patent in court, or (2) settle the lawsuit by paying (or
otherwise compensating) the generic to delay launching its product until a later
specified date. The second option is a “reverse payment settlement agreement.”
Many reverse payment settlements are entered in good faith and produce positive
effects (e.g., a date certain for generic entry, eliminated litigation costs, reduced
uncertainty). Unfortunately, reverse payment settlements are also ripe for anti-
competitive abuse. The complicated nature of pay-for-delay and the diversity of
approaches make it difficult for the FTC—the agency tasked with rooting out
anti-competitive conduct—to identify, let alone prove, true pay-for-delay
schemes.

B. Secondary Patents

Secondary patents rather than primary patents are the usual subject of
paragraph IV certifications. Further, many pharmaceuticals are protected by
multiple patents. When multiple patents concern the same drug, the patents are
often differentiated as “primary” or “secondary.” 

Primary patents protect the “active ingredient,” or the invented chemical that
is primarily responsible for a medication’s effect.42 Primary patents are usually

37. 21 U.S.C. § 355 (j) (2022).

38. Id. §§ 355(j)(2)(A)(vii)(IV).

39. Id. §§ 355(j)(2)(B)(ii).

40. Id. §§ 355 (j)(5)(B)(iii). 

41. Feldman & Frondorf, supra note 21, at 509.

42. Kevin T. Richards et al., CONG. RSCH. SERV., R46221, DRUG PRICING AND



130 INDIANA HEALTH LAW REVIEW [Vol. 21:121

stronger and therefore not implicated in paragraph IV certifications. Secondary
patents do not protect the main invention but protect other aspects of the medicine
including dosage (e.g., five milligrams per kilogram of body weight), form of
administration (e.g., intravenous or “IV,” pill form, capsule), method of use (e.g.,
used to treat a specific form of cancer), manufacturing processes, or other non-
primary characteristics. 

For example, assume chemical X is the active ingredient in drug A, which
effectively treats breast cancer when administered intravenously at five mg/kg.
The inventor invented chemical X, but also discovered that chemical X has a
therapeutic effect on breast cancer, can be administered effectively through an
intravenous solution, and is effective therapeutically at a five mg/kg dose.
Chemical X is protected by a primary patent, while drug A’s application to breast
cancer, intravenous administration technique, and effective dosage of five mg/kg
are protected by secondary patents. The primary and secondary patents protect
different features of the same drug and are usually filed at different times,
creating multiple, staggered layers of patent protection. According to an FTC
study, generic challengers win 73% of paragraph IV cases that are litigated to
completion.43 However, the majority of paragraph IV cases settle with no
conclusion regarding the patent’s true validity.44 

Patents implicated by paragraph IV certifications tend to be secondary
patents,45 often vulnerable to invalidation.46 Innovators/patentees recognize this
risk and prospective loss of monopoly power. As a solution, patentees defending
a weak secondary patent may wish to settle. By settling, the inventor seals off the
dispute and saves its patent from potential invalidation.

C. Reverse Payment Settlement Agreements

Rather than engage in drawn-out, expensive litigation with a fair chance of
patent invalidation and loss of market exclusivity, the plaintiff-innovator/patentee
may propose a mutually beneficial settlement in the form of a reverse payment
settlement agreement. As previously mentioned, a reverse payment settlement
essentially involves the plaintiff-innovator offering the defendant-generic some
value greater than the generic company’s prospective profits, but less than the
innovator company’s prospective loss. In exchange for the value received, the
generic company foregoes or delays market entry, and thus the innovator

PHARMACEUTICAL PATENTING PRACTICES 8 (2020), https://crsreports.congress.gov/product/pdf/

R/R46679 [https://perma.cc/YFD8-P5Z3].

43. U.S. Fed. Trade Comm’n, Generic Drug Entry Prior to Patent Expiration: An FTC Study,

13 (2002), https://www.ftc.gov/reports/generic-drug-entry-prior-patent-expiration-ftc-study

[https://perma.cc/J5V9-9X8R].

44. Brian C. Howard, Hatch-Waxman / ANDA Litigation Report 2017, Global Patent Group,

iii (April 2017), https://pages.lexmachina.com/Email_ANDAReport2017_LPRequests.html

[https://perma.cc/L9ZG-8W4M].

45. Feldman & Frondorf, supra note 21, at 511.

46. Feldman, supra note 10, at 22, 25.



2024] INCENTIVIZING DRUG AFFORDABILITY 131

preserves its monopoly.47 The reverse payment settlement results in mutual
economic benefit, and mutual avoidance of the risk of losing at trial. 

“Reverse payment settlement agreement” reflects the counterintuitive nature
of these agreements. “Reverse” communicates that in the paragraph IV context,
the plaintiff (patent-holding innovator) actually compensates the defendant, rather
than the defendant settling the dispute by compensating the plaintiff. This is the
reverse of the usual dynamic, in which a plaintiff suffers damages caused by a
defendant, and the defendant settles the case by compensating the plaintiff. As the
name suggests, the roles are reversed, with the plaintiff ironically compensating
the defendant to resolve the dispute. While this is somewhat suspicious, the
reversed flow of the settlement payment can somewhat be attributed to the unique
nature of the paragraph IV proves. While the patent-holder is indeed the plaintiff,
the generic challenger is the true provocateur via its paragraph IV certification
stating that the innovator’s patent is invalid or would not be infringed.

The substance of modern pay-for-delay agreements exhibit an impressive
level of complexity, as a straight-forward quid pro quo—cash for exiting, or not
entering, the market—would be considered antitrust on its face following the
2013 case of FTC v. Actavis (as discussed later in this Note).48 Contemporary
reverse payment settlements often avoid cash payments but include non-cash
consideration to achieve the same result. The modern complexity is illustrated by
the FTC’s analysis of these agreements, in which the agency may label an
agreement as involving “possible compensation.”49 Regardless of the complexity
and specific terms of a reverse payment settlement, an anti-competitive reverse
payment settlement boils down to a patentee compensating a would-be competitor
to stay out of its market.

Although this Note focuses on instances of abuse, many reverse payment
settlements are pro-competitive and accelerate competition. When a patent is
strong and likely to be upheld in court, a reverse payment settlement may actually
bring the generic to market before the patent expires. Even though the patent is
probably valid and if so would be infringed, a risk-averse innovator might pursue
a reverse payment settlement to eliminate the threat of an unlikely but extremely
damaging trial outcome. In such situations, the parties compromise for a date of
generic entry later than the generic company would prefer, but earlier than the
date of the valid patent’s expiration.50 Most reverse payment settlements are of
this pro-competitive character and induce generic entry and associated discounts
before the disputed patent would otherwise allow.51 

47. Feldman & Frondorf, supra note 21, at 511.

48. Id. at 516.

49. Jamie Towey & Brad Albert, Then, Now, and Down the Road: Trends in Pharmaceutical

Patent Settlements After FTC v. Actavis, COMPETITION MATTERS (May 28, 2019), https://www.ftc.

gov/enforcement/competition-matters/2019/05/then-now-down-road-trends-pharmaceutical-patent-

settlements-after-ftc-v-actavis [https://perma.cc/G5LG-AEN8].

50. Impax Labs., Inc. v. FTC, 994 F.3d 484, 493 (5th Cir. 2021).

51. Laura Karas et al., Pharmaceutical “Pay-for-Delay” Reexamined: A Dwindling Practice

or a Persistent Problem?, 71 HASTINGS L.J. 959, 967-68 (May 2020), https://papers.ssrn.com/sol3/



132 INDIANA HEALTH LAW REVIEW [Vol. 21:121

Even if they do not produce the pro-competitive effects of the previous
example, reverse payment settlement agreements can be commercially reasonable
and legally justifiable. Consider that the 180-day generic exclusivity period
begins running the day the first generic filer markets the drug. In the race to file
first and win the 180-day exclusivity period as the first generic filer, the generic
company’s challenge may be weak, or the innovator’s patent strong. Further, and
not uncommon for small innovators with one or few drugs, the innovator’s
survival might depend upon the revenues currently protected by the challenged
patent—the innovator’s risk tolerance might require the innovator to leave
nothing to chance, even if a patent is strong. Both parties want to avoid the binary
risk of litigation for reasons beyond minimizing legal fees; the innovator expects
to win but cannot afford to lose, and the generic expects to lose. To protect its
patent, the innovator may offer to license marketing rights to the generic firm or
commit to not launching its own authorized generic during the 180-day
exclusivity period, which does not prohibit a company from selling its own FDA-
approved product, repackaged and sold at a lower price. In exchange, the generic
firm agrees not to launch its competing drug until the disputed patent expires.
Because losing at trial would negate the 180-day exclusivity right, the generic
firm accepts these terms. The innovator is satisfied with the preservation of its
likely-valid but life-giving patent, and the generic firm is satisfied with the
preservation of its 180-day exclusivity right. However, the patient remains the
source of inelastic demand in this market made less competitive by the reverse
payment settlement. 

As illustrated, reverse payment settlement agreements can be pro-competitive
and beneficial to patients, or simply within the boundaries of capitalism and
antitrust and intellectual property law. While the good-faith nature of many
reverse payment settlements must be recognized, this does not make anti-
competitive reverse payment settlements any less expensive or any less
detrimental to patients. Originally characterized by undisguised quid pro quos, the
classic version of anti-competitive reverse payment settlements eventually earned
Supreme Court disapproval.52 Before discussing the Court’s decision, however,
an analysis of other pay-for-delay strategies is warranted.

V. ANALYSIS: DIVERSIFYING DELAY

The variation and depth of pay-for-delay—including well-disguised anti-
competitive reverse payment settlements—is indefinite. Although Congress
periodically attempts to define and outlaw specific manifestations of pay-for-
delay, the menu of substitutes greatly mutes the intended effect of Congressional
efforts. “Anti-competitive conduct can come in too many different forms, and is
too dependent upon context, for any court or commentator ever to have
enumerated all the varieties.”53 Notwithstanding, this Note attempts to describe

papers.cfm?abstract_id=3458552 [https://perma.cc/PQ2J-LQNA].

52. FTC v. Actavis, Inc., 570 U.S. 136, 141 (2013). 

53. In re Suboxone (Buprenorphine Hydrochloride & Naloxone) Antitrust Litig., 64 F. Supp.



2024] INCENTIVIZING DRUG AFFORDABILITY 133

several variations of pay-for-delay beyond reverse payment settlement
agreements.

A. Citizen Petitions

The Code of Federal Regulations—21 CFR §10.20-30—allows interested
persons to submit “citizen petitions” to the FDA whereby the interested person
advises the agency to take, or refrain from taking, an action.54 Sometimes these
concerned citizens are pharmaceutical companies advising the agency to reject
generic drug applications poised to compete with the brand name product.
Logically, the inventor of a drug is in an ideal position to identify risks or
deficiencies associated with copying the invention. Thus, it is understandable that
petitions to block generics are frequently sourced by innovators with much to
lose. Nevertheless, the conflict of interest is obvious. 

Citizen petitions raise various concerns with a drug’s safety profile, and are
usually found immaterial. From 2008 to 2013, 124 petitions to delay generic
approvals were filed, with only eight granted; a mere 6% of petitions opposing
generic approvals raised credible issues.55 However, a citizen petition can delay
generic competition without being granted.

After the FDA receives a citizen petition advising against an ANDA
approval, the FDA has 150 days to review the petition. During that 150-day
period, the review of the ANDA for the respective generic drug is placed on
hold.56 Extending brand exclusivity—and therefore monopoly price—for 150
days can translate to hundreds of millions of dollars in sales for the company, and
consequently hundreds of millions of dollars in cost to the healthcare system.57

Exacerbating the problem, citizen petitions can be creatively deployed to
maximize anti-competitive effect. For example, innovators can file numerous
petitions targeted at a single generic applicant to amplify the redirection of FDA
resources. In 2018, a Delaware district court dismissed an FTC complaint against
Shire ViroPharma.58 The FTC’s complaint alleged that ViroPharma “inundated
the FDA” with numerous filings, including 24 citizen petitions, intended to
“maintain its monopoly on Vancocin Capsules.”59 Another way to maximize
delay is to wait until the 11th hour to file a petition. In 2015, Bayer Healthcare

3d 665, 679 (E.D. Pa. 2014) (quoting West Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d

85, 109 (3rd Cir. 2010)). 

54. 21 C.F.R. §§ 10.20, 10.30 (2022).

55. Feldman & Frondorf, supra note 21, at 546-47. 

56. 21 C.F.R. § 10.30 (2022).

57. Robin Feldman & Connie Wang, A Citizen’s Pathway Gone Astray — Delaying

Competition from Generic Drugs, 376 NEW ENG. J. MED. 1499, 1501 (Apr. 20, 2017),

https://repository.uclawsf.edu/cgi/viewcontent.cgi?article=2557&context=faculty_scholarship 

[https://perma.cc/7KQY-YYCJ].

58. FTC v. Shire ViroPharma Inc., No. CV 17-131-RGA, 2018 WL 1401329, at *1 (D. Del.

Mar. 20, 2018), aff'd, 917 F.3d 147 (3d Cir. 2019).

59. Id.



134 INDIANA HEALTH LAW REVIEW [Vol. 21:121

filed its citizen petition one day before the expiration of its patent.60 Such timing
effectively extends a patent by 150 days.

Antitrust recourse exists for severe abuse of citizen petitions but, as is
thematic of all attempts to reign in pay-for-delay, high burdens of proof and vast
grey areas allow careful players to leverage citizen petitions without becoming
realistic targets for the FTC.61 Citizen petitions remain a highly effective means
of delaying generic competition. With additional planning and attention to detail,
patentees can maximize the impact of a citizen petition by filing several petitions
or by waiting until the eve of patent expiration to submit the petition.

B. Evergreening & Product Hopping

“Evergreening” informally refers to the practice of insulating a brand-name
drug from competition by tacking on secondary patents for slight modifications
made to the drug.62 These secondary patents extend market exclusivity beyond the
life of the primary patent.63 When litigated to completion, the secondary patents
are invalidated—68% of the time according to one study—more than upheld.64

Evergreening is sometimes interchangeable with “product hopping” due to the
appearance of “hopping” to a slightly different product with a later patent
expiration.65 However, product hopping usually includes a marketing pivot. 

Although not consistently defined, product hopping is generally “the
switching of the market in order to stifle generic competition.”66 In practice,
product hopping is often achieved by reformulating a drug to the point where a
pending generic is no longer substitutable, and then encouraging doctors to
prescribe the reformulated version instead of the original version which is the
focus of generic developers.67 If effective, there will be no market for the generic
drug because doctors and patients have “hopped” to the reformulated version. 

AstraZeneca’s handling of Prilosec—a multi-billion dollar per year earner for
the company—is often cited as a product hopping example.68 As Prilosec’s
primary patent approached expiration, AstraZeneca introduced Nexium—a

60. Michael A. Carrier & Carl Minniti, Citizen Petitions: Long, Late-Filed, and At-Last

Denied, 66 AM. U. L. REV. 305, 309, 346-47 (2017), https://digitalcommons.wcl.american.edu/cgi/

viewcontent.cgi?article=1956&context=aulr [https://perma.cc/8CER-GU6A].

61. Feldman & Wang, supra note 56, at 1501; Feldman & Frondorf, supra note 21, at 547.

62. Richards et al., supra note 41.

63. Id.

64. Feldman, supra note 10, at 21.

65. Richards et al., supra note 41.

66. Michael A. Carrier & Steve D. Shadowen, Product Hopping: A New Framework, 92

NOTRE DAME L. REV. 167, 169 (2017), https://papers.ssrn.com/sol3/papers.cfm?abstract_

id=2747526 [https://perma.cc/EKV8-AGKA].

67. Id. at 168-69.

68. Alex Brill, The Cost of Brand Drug Product Hopping, MATRIX GLOBAL ADVISORS, at

4 (Sep. 2020), https://www.affordableprescriptiondrugs.org/app/uploads/2020/09/

CostofProductHoppingSept2020-1.pdf [https://perma.cc/2YEU-37JC].



2024] INCENTIVIZING DRUG AFFORDABILITY 135

slightly modified version of Prilosec with a largely equivalent therapeutic effect.69

Unlike Prilosec, Nexium boasted 13 remaining years of patent protection.70 The
launch of Nexium was accompanied by a marketing campaign to switch
prescribers from Prilosec to Nexium.71 Beyond Prilosec, product hopping
strategies often leverage secondary patents to extend exclusivity. For example,
an innovator can switch a product nearing patent expiration from a tablet to a
capsule and enjoy fresh exclusivity afforded by the secondary patent associated
with the capsule form.72 

By product hopping, brand companies make subtle changes or improvements
to existing drugs and encourage prescribers and patients to adopt this new and
improved version. If successful, a company that developed a generic to the now
outdated product is left with no market. The result is a sustained monopoly for the
innovator’s branded product. 

While somewhat interchangeable, evergreening refers to layering patents onto
an existing drug to prolong the monopoly environment, while product hopping
usually suggests a marketing effort aimed at reducing demand for a previous
iteration of a new but largely interchangeable product. Firms evergreen a specific
drug by layering on secondary patents, while product hoppers are less concerned
with a specific drug’s primary patent expiration because demand has hopped to
a new product. Overcoming the numerous secondary patents guarding an
evergreened product demands time and resources from generic challengers, which
may ultimately gain approval only to enter a dead market due to product
hopping.73 In either case, generic competition is delayed.

C. Constricting Supply

In addition to patent-based methods of delaying generic competition, the drug
supply chain can be leveraged against generic suitors. In 2015, pharmaceutical
executive Martin Shkreli gained notoriety when he increased the price of
Daraprim—a drug used to treat toxoplasmosis, a rare parasitic infection—from
$17.60 to $750.00.74 The price hike, aided by Shkreli’s candid personality and
unapologetic response, drew criticism from politicians, the public, and of
consequence, regulators. The FTC filed an antitrust lawsuit against Shkreli which
revealed an impressive pay-for-delay strategy.75

In FTC. v. Shkreli, Shkreli’s company, Vyera, lacked patent protection for
Daraprim, but successfully delayed generic competition for eighteen months (the
drug was actually over 60 years old, but the low price and small patient
population made Daraprim commercially unattractive to generic companies

69. Id.

70. Id.

71. Id.

72. Id.

73. Richards et al., supra note 41.

74. FTC v. Shkreli, 581 F. Supp. 3d 579, 601 (S.D.N.Y. 2022).

75. Id. 



136 INDIANA HEALTH LAW REVIEW [Vol. 21:121

which did not pursue generic Daraprim until this development).76 The 18-month
delay was responsible for almost $65 million in continued monopoly sales.77

Vyera executives failed to disguise a series of tactics and agreements that
prevented prospective generic entrants from obtaining the supplies necessary to
receive FDA approval.78 

To earn FDA approval of an ANDA, the generic ANDA filer must
demonstrate its ability to produce the reference product (the “reference product”
is the brand drug the generic seeks to emulate) and comply with certain
production standards.79 In this process, the generic company must acquire the
reference product—Daraprim—as well as the primary ingredient responsible for
the therapeutic effect—pyrimethamine.80 Through a series of agreements, Vyera
positioned itself as the gatekeeper of the supplies necessary to develop a generic,
including the active ingredient—pyrimethamine—and Daraprim itself.81

By placing Daraprim in a closed, or “specialty,” distribution network,
Daraprim’s generic suitors could not obtain the drug without Vyera’s approval,
which Vyera refused to provide.82 Vyera then negotiated exclusive supplier
agreements with the few authorized sellers of pyrimethamine, cutting off generic
companies from Daraprim’s essential ingredient.83 This case notably lacked any
serious pro-competitive evidence to justify the actions, and thus the court held
Shkreli liable with an unusual degree of ease and punitive wrath.84 

D. Recap: Diversifying Delay

While reverse payment settlements are the classic examples of delaying
generic entry, methodology has evolved. Today, citizen petitions, evergreening,
product hopping, and exclusive supplier agreements are responsible for delayed
generic entry in addition to some reverse payment settlements. Citizen petitions
allow firms to prolong market exclusivity by raising artificial concerns about
pending generic products. Firms evergreen existing drugs by tacking on
secondary patents to extend monopoly protection beyond expiration of the
primary patent.85 Product hopping occurs when an innovator firm deploys
marketing resources to redirect demand for a drug facing imminent generic
competition to a new market for a slightly amended version of the same drug. If
a drug has no patent protection, innovators can still protect a monopoly market
by contractually prohibiting suppliers from supplying necessary ingredients to

76. Id. at 590.

77. Id. at 591. 

78. Id. at 633-34.

79. Id. at 595-96.

80. Id. at 605.

81. Fed. Trade Comm'n v. Shkreli, 581 F. Supp. 3d 579, 605 (S.D.N.Y. 2022).

82. Id. at 602.

83. Id. at 602-03.

84. Id. at 636-38.

85. Richards et al., supra note 41, at 1.



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generic developers. Also without patent protection, an innovator can restrict
distribution of the drug itself to strain generic developers that require the
reference product as a prerequisite to FDA approval. Each strategy burdens
patients and the healthcare system at large with higher prices and lower access.

VI. ANALYSIS: CURRENT APPROACHES FALL SHORT

Pay-for-delay is recognized by policymakers as a problem. However, the
private firms engaging in the practice are nimbler than the institutions seeking to
reign in drug prices. The judiciary and the federal legislature have implemented
and proposed solutions and there has been some effective enforcement, but no
current or proposed approach is dynamic enough to attack the broad practice of
pay-for-delay at its core.

A. Existing Law: FTC v. Actavis

The classic iteration of pay-for-delay—reverse payment settlement
agreements—was confronted by the Supreme Court in 2013.86 In FTC v. Actavis,
the FTC urged the Supreme Court to hold all reverse payment settlements
presumptively unlawful.87 Actavis recommended an opposite stance, asserting
that reverse payment settlements should be immune from antitrust liability as long
as the settlement’s anti-competitive effects fell within the exclusionary scope of
the patent.88 The Court declined to adopt either position and instead established
a “rule of reason” test.89 When applying the test, courts weigh the anti-
competitive effects of a reverse payment settlement against any pro-competitive
justifications, evaluating the agreements on a case-by-case basis.90 Thus, reverse
payment settlements in patent infringement suits are neither immune from
antitrust attack, nor presumptively unlawful.91 

The 5-3 decision stated considerations relevant to the determination of an
agreement’s antitrust character while also navigating considerations of patent law.
Factors indicative of a pay-for-delay character importantly include the size of the
payment, as a larger payment may suggest a weaker patent.92 Attempting to
reconcile patent rights with antitrust considerations, the Court stated “the size of
the unexplained reverse payment can provide a workable surrogate for a patent's
weakness, all without forcing a court to conduct a detailed exploration of the
validity of the patent itself.”93 Another factor is the absence of an exchanged
service for which a large payment may be compensation.94 By applying this fact-

86. See FTC v. Actavis, Inc., 570 U.S. 136, 141 (2013).

87. Id. at 158-59.

88. Id.

89. Id.

90. Id. at 159.

91. Id. at 146-54.

92. Id. at 158.

93. Id. at 158.

94. Karas et al., supra note 50, at 963.



138 INDIANA HEALTH LAW REVIEW [Vol. 21:121

specific approach, there is a viable avenue to attack egregious reverse payment
settlements. Of course, the analysis also presents boxes to check for parties
wishing to disguise an anti-competitive reverse payment settlement.
Commentators have characterized applications of the rule of reason test in pay-
for-delay contexts as “notoriously convoluted.”95 This characterization draws
support from the dissenting Chief Justice Roberts, who wished “good luck to the
district courts that must, when faced with a patent settlement, weigh the likely
anti-competitive effects, redeeming virtues, market power, and potentially
offsetting legal considerations present in the circumstances.”96

By leaving room for antitrust liability despite an existing patent, the 5-3 FTC
v. Actavis opinion was a step in the direction of deterring pay-for-delay. Indeed,
the prevalence of reverse payment settlements decreased following the decision.97

Ultimately, however, the decision accelerated a shift to alternatives like citizen
petitions, evergreening, product hopping, and supply constraints. Further, the
decision caused parties to increase the complexity of their agreements and
therefore the burden of proving illegality.98 Since 1997 (the rule of reason
standard has applied to other antitrust issues longer than it has applied to reverse
payment settlements), plaintiffs litigating against a rule of reason standard fail to
show a substantial anti-competitive effect 90% of the time.99 

B. Proposed Law

Many proposed legislative solutions, while perhaps effectively striking at a
specific means of pay-for-delay, are unlikely more than band-aid solutions. The
Preserve Access to Affordable Generics and Biosimilars Act (“PAAGBA”) is one
such proposal that is emblematic of the disadvantage associated with current
legislative approaches to the problem. While pay-for-delay parties can nimbly
adjust tactics and employ new strategies to disguise and sustain anti-competitive
action, policymakers laboriously piece together bills aimed at small targets and
which rarely graduate from legislative committees.

The PAAGBA, if enacted, would attack reverse payment settlement
agreements by presuming an antitrust violation when infringement suits settle
with an exchange of value resulting in an ANDA filer agreeing to “limit or forgo
research, development, manufacturing, marketing, or sales of the ANDA product
or biosimilar biological product, as applicable, for any period of time.”100

Essentially, the PAAGBA would skirt the burden imposed by the Supreme Court
in FTC v. Actavis of proving anti-competitive conduct under the rule of reason

95. Feldman, supra note 10, at 13.

96. Actavis, Inc., 570 U.S. at 173.

97. Karas et al., supra note 50, at 964.

98. Feldman, supra note 10, at 15.

99. NCAA v. Alston, 141 S. Ct. 2141, 2161 (2021).

100. Preserve Access to Affordable Generics and Biosimilars Act, S. 1428, 117th Cong. §

27(a)(2)(A)(ii) (as reported in the Senate, Dec. 9, 2021).



2024] INCENTIVIZING DRUG AFFORDABILITY 139

test.101 Defendants would then be tasked with rebutting the anti-competitive
presumption by clear and convincing evidence.

A legal, and in effect political obstacle to the proposed PAAGBA arises in the
necessary juxtaposition of patent law with antitrust law. In contrast to FTC v.
Actavis, which struck a balance between patent and antitrust considerations, the
PAAGBA would value antitrust risk above patent rights. Patents essentially
confer antitrust immunity to their holder by granting a temporary, legal
monopoly,102 and patents “shall be presumed valid” with the burden of
establishing invalidity “on the party asserting such invalidity.”103 Because a patent
may constructively immunize its holder against antitrust liability, the PAAGBA’s
presumption of antitrust behavior necessarily requires a simultaneous
presumption of the patent’s invalidity. Due to the suspicious nature of reverse
payment settlements, the Supreme Court in Actavis allowed antitrust claims to
proceed through a rule of reason test notwithstanding presumed patent validity
but rejected the FTC’s position that illegality of reverse payment settlements
should be presumed.104 While Actavis sought an equilibrium between patent and
antitrust considerations, the PAAGBA would summarily override patent rights
in cases of reverse payment settlements. Such a departure from established
treatment of intellectual property—presuming antitrust behavior, effectively
presuming patent invalidity, and placing the initial burden of proof on the patent
holder—has struggled to gain traction, perhaps because of the reasonable
proposition that the presumption of validity is “rightly based on the expertise of
patent examiners presumed to have done their job.”105 

Even if the PAAGBA overcame political and interest group opposition, it
offers minimal benefit because it addresses one of many techniques used to
prolong market exclusivity. If the risk of liability associated with reverse
settlement payments increases, brands will take another angle. For instance,
instead of reverse payment settlements, brands would increase the number of
patents filed on the drug and create a “patent thicket.”106 Over the course of years,
Congress could theoretically legislate pressure on different methods of delaying
generics, only to be front-run by offenders leveraging new tactics to achieve the
same result—minimal competition and high prices.

Dozens of bills akin to the PAAGBA have been considered in the wake of
Actavis, producing little material progress. Rather than focusing efforts on futile
attempts to tighten the regulatory grip on innovators and generics, policymakers
should examine the bigger picture. Instead of trying and failing to punish anti-
competitive conduct after the fact, Congress should implement a non-punitive

101. Richards et al., supra note 41.

102. Actavis, Inc., 570 U.S. at 136.

103. 35 U.S.C. § 282(a) (2022).

104. Actavis, Inc., 570 U.S. at 138.

105. In re Humira (Adalimumab) Antitrust Litig., 465 F. Supp. 3d 811, 834 (N.D. Ill. 2020),

aff'd sub nom. See also, Mayor of Baltimore v. AbbVie, Inc., 42 F.4th 709 (7th Cir. 2022) (quoting

Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1574 (Fed. Cir. 1992).

106. Richards et al., supra note 41.



140 INDIANA HEALTH LAW REVIEW [Vol. 21:121

solution by incentivizing firms away from pay-for-delay strategies.

VII. INCENTIVIZING AFFORDABILITY: PRIORITY REVIEW

& WILDCARD EXCLUSIVITY

Because the push of penalty-based approaches rarely materializes, the pull of
two incentive-based approaches should be explored: (1) FDA priority review
vouchers (“PRVs” are not uncommonly valued in the hundreds of millions),107

and (2) transferable wildcard exclusivity vouchers (“wildcards”). With built-in
safeguards against abuse, issuing these assets to firms in exchange for unilateral
price decreases or facilitation of generic entry could reduce the appeal of pay-for-
delay and thereby improve affordability and access.

A. Priority Review Vouchers

Priority review vouchers reduce the FDA review period of any new drug
application (“NDA”) by four months (ten months shortened to six months).108

PRVs are currently used to incentivize low profitability, high-need research and
development in the areas of tropical disease, rare pediatric disease, and illnesses
related to public health emergencies.109 Companies sponsoring development in
these areas are awarded PRVs, which are ultimately redeemed by the awardee, or
by another company that purchased the PRV from the awardee, for accelerated
review of any NDA. Bringing a patented drug to market four months faster
through a PRV translates to four additional months of monopoly
pricing—without having to delay generic entry. Factoring in the cost of delaying
generic entry (e.g., litigation, document preparation, filing fees, reverse payment
settlements), it is fully possible that obtaining a PRV would outweigh delaying
generic entry. Even without factoring in the cost of delay efforts, in some
situations, the market value or sale price of a PRV would ideally exceed the value
of prolonged monopoly pricing achievable through pay-for-delay. Further, using
PRVs increases the likelihood that profits will be reinvested in research and
development because after all, the voucher is used to review a new drug
application. Allowing the FDA to flex the pace of accelerated approval based on
the quality of the company’s pro-competitive, price-lowering conduct would also
add to the effectiveness of this approach. 

The marketability of PRVs is essential to their appeal.110 Since the FDA
began awarding PRVs in 2007, the Government Accountability Office has used

107. U.S. GOV’T ACCOUNTABILITY OFF., GAO-20-251, DRUG DEVELOPMENT: FDA’S

PRIORITY REVIEW VOUCHER PROGRAMS (Jan. 2020), https://www.gao.gov/assets/gao-20-251.pdf

[https://perma.cc/CNQ8-FKU6].

108. U.S. GOV’T ACCOUNTABILITY OFF., supra note 105, at 2.

109. Food and Drug Administration Amendments Act of 2007, Pub. L. No. 110-85, § 1102,

121 Stat. 823, 972 (2007); Food and Drug Administration Safety and Innovation Act, Pub. L. No.

112-144, § 908, 126 Stat. 993, 1094 (2012); 21st Century Cures Act, Pub. L. No. 114-255, § 3086,

130 Stat. 1033, 1145 (2016); U.S. GOV’T ACCOUNTABILITY OFF., supra note 105. 

110. Id. at 13-14.



2024] INCENTIVIZING DRUG AFFORDABILITY 141

available data to report PRV sale prices ranging from $67.5 million to $350
million.111 If appropriately implemented, this program could bring both
innovative and generic drugs to market faster. The effect is a positive-sum game,
where all stakeholders—brand-name companies, generic companies, patients,
taxpayers—can make and save money together. 

An expanded PRV program is not without drawbacks. One major hindrance
to PRV expansion is the inflationary effect of introducing more PRVs to the
market. However, if the FDA has the latitude to tailor the value of the PRVs by
varying the timeframes and setting expiration dates, the agency could ensure the
PRVs retain value regardless of how many are issued. This solution in turn
requires more bandwidth from the FDA, which is a drawback in its own right. If
adopted, this expansion requires a complementary increase in FDA funding to
make sure the agency is appropriately staffed to administer the program. A PRV
inventive program could also be improved upon by designing a larger menu of
incentives outside the scope of this Note, such as tax credits and FDA user fee
waivers. However, introducing more incentives would do little, if anything, to
mitigate PRV-specific drawbacks, and additional incentives would again
implicate FDA bandwidth. 

Futility risks ultimately counsel against PRV expansion. From the 2009
inception of the PRV program through 2019, thirty-one PRVs had been
issued—seventeen have been sold, and sixteen have been redeemed (some PRVs
have been both sold and redeemed, hence the combined amount sold and
redeemed exceeds the total number of PRVs issued).112 For an illustration of PRV
issuances and redemptions, see Figure 2.

Figure 2113

111. Id.

112. U.S. GOV’T ACCOUNTABILITY OFF., supra note 105.

113. Id.



142 INDIANA HEALTH LAW REVIEW [Vol. 21:121

The PRV program—in its fourteenth year of existence in 2023—is already
experiencing inflation which would be exacerbated by a major expansion of the
program. The program has already expanded to incentivize three distinct areas of
drug development, and the marginal utility of obtaining a PRV shrinks with each
additional PRV entering circulation. The steady decrease in PRV sale prices is
depicted by Figure 3, below. 

Figure 3114

If PRVs were effective incentives in the context explored by this Note, many
would be issued and drug prices would decrease. However, increasing the
prevalence of PRVs would eventually saturate the PRV market to a point where
the value of earning a PRV would seldom rival the opportunity cost of delaying
generic entry. Although only some PRV sale prices have been publicized, it is
difficult to dispute the economic reasoning that higher PRV supply causes lower
PRV demand, and thus lower PRV sale prices. In other words, the program’s
success in lowering drug prices would be unlikely to last. This is not to say the
PRVs would ever be valueless, but as more PRVs are issued it becomes less and
less likely that the PRVs value would outweigh the value of longer market
exclusivity. The PRV program has already expanded to include three areas, and
expanding it once again to encourage indefinite PRV issuances could quickly
exhaust the program’s value. Not only would this render PRVs moot as an
incentive to price reduction, but the inflationary harm would metastasize to
existing targets of the PRV incentive program, namely tropical disease, rare
pediatric disease, and public health emergency countermeasures.

Furthermore, FDA bandwidth is finite. The program’s success and more PRV
issuances would strain FDA resources. Eventually, it would be impossible for the

114. Id. at 15.



2024] INCENTIVIZING DRUG AFFORDABILITY 143

FDA to meet the shorter timeframes of priority review. There are already
examples where the FDA had to extend PRV deadlines, thereby muting the
advantage of  using a PRV. In November 2022, Argenyx spent $102 million
acquiring a PRV from Bluebird Bio, which Argenyx submitted to shorten FDA
review of Vygart—used to treat generalized Myasthenia Gravis in adults—by
four months.115 In January 2023, the FDA informed Argenyx that the PDUFA
date (Prescription Drug User Fee Act date; the date by which FDA must respond
to new drug applications) would be extended from March 20, 2023 to June 20,
2023 “to allow sufficient time to review.”116 Another recent example of the
FDA’s bounded capacity impacted Japan-based Astellas Pharma and the
company’s menopause drug candidate, Fezolinetant. In a high-stakes push to be
the first to market, Astellas used a PRV—valued at $97 million on Astellas’
books—to trim four months off the FDA’s review of Fezolinetant, establishing
a PDUFA date of February 22, 2023.117 On February, 17—just five days before
the deadline—Astellas was notified “that the FDA is extending the PDUFA goal
date by three months, to May 22, 2023, to allow more time to complete their
review.”118 The Institute for Clinical and Economic Review (ICER)—a nonprofit
dedicated to studying the cost-effectiveness of medicine—estimated that
3,340,000 patients would begin Fezolinetant treatment each year, and
recommended a price between $2,000 and $2,500 per year.119 Assuming approval
and a highly efficient launch, the three-month delay could directly reduce
Astellas’ Fezolinetant sales by hundreds of millions of dollars. The pertinent
point here, however, is that the PRV failed to materialize into any competitive
advantage. The setbacks befalling Argenyx and Astellas highlight the boundaries
of FDA capacity in the priority review context and suggest that the effect of PRV
expansion explored in this Note, even if authorized by Congress, would struggle
to materialize at scale.

115. Nicole DeFeudis, Argenx Purchases $100M+ FDA Priority Review Voucher from

Bluebird Bio, ENDPOINTS NEWS (Nov. 30, 2022), https://endpts.com/argenx-purchases-100m-fda-

priority-review-voucher-from-bluebird-bio/ [https://perma.cc/TF3Q-NNMS].

116. Argenyx Receives Notification of PDUFA Date Extension for SC Efgartigimod,

GLOBENEWSWIRE (Jan. 27, 2023), https://www.globenewswire.com/news-release/2023/01/

27/2596602/0/en/argenx-Receives-Notification-of-PDUFA-Date-Extension-for-SC-

Efgartigimod.html [https://perma.cc/DK7B-KA8B].

117. Katherine Lewin, Astellas' Menopause Drug Hit by FDA Delay After Spending $97M On

a Priority Review Voucher, ENDPOINTS NEWS (Feb. 21, 2023), https://endpts.com/astellas-

menopause-drug-hit-by-fda-delay-after-spending-97m-on-a-priority-review-voucher/

[https://perma.cc/5EAU-2BJR].

118. Astellas Provides Update on Fezolinetant New Drug Application in U.S., PR NEWSWIRE

(Feb. 19, 2023), https://www.prnewswire.com/news-releases/astellas-provides-update-on-

fezolinetant-new-drug-application-in-us-301750449.html [https://perma.cc/6D9M-SVFQ]. 

119. Francesca L. Beaudoin et al., Fezolinetant for Moderate to Severe Vasomotor Symptoms

Associated with Menopause: Effectiveness and Value, INST. CLINICAL & ECON. REV. at 58 (Dec.

1, 2022), https://icer.org/wp-content/uploads/2022/06/ICER_Menopause_Evidence-

Report_12012022.pdf [https://perma.cc/U8AA-UU4S].



144 INDIANA HEALTH LAW REVIEW [Vol. 21:121

Fortunately, there may be another low-friction avenue to lower drug
spending. In a GAO study, the existing PRV program was evaluated, and
potential alternatives explored.120 Stakeholders interviewed by the GAO
suggested alternative incentives which, among industry participants, were viewed
as superior to PRVs.121 GAO interviewees and literature specifically identified
incentives related to market exclusivity.122 Not only was exclusivity more
attractive to stakeholders than PRVs, but the major drawbacks of an expanded
PRV incentive—inflationary effect on PRV value, FDA bandwidth, overall
exhaustion of PRV system—are less applicable to an appropriately tailored
market exclusivity incentive. 

B. Wildcard Exclusivity Vouchers

The preferred solution recommended by this Note is a transferable, wildcard
exclusivity voucher (“wildcard”). Drug developers that facilitate generic entry or
unilaterally reduce price would be awarded a wildcard exclusivity voucher, to be
redeemed for extended market exclusivity for another drug, or sale to another
drug developer. This wildcard incentive, appropriately limited, would offer
innovators a lawful, transparent, predictable path to value without sacrificing
competition and affordability in the process. Unadopted in any form in the U.S.,
wildcard exclusivity has been explored by some industry stakeholders and U.S.
policymakers as a means to incentivize antibiotic development.123 However,
leveraging wildcard exclusivity to induce lower drug expenditures is novel.

(a) Outlining the Wildcard Exclusivity Program

A wildcard exclusivity program would reward price reductions and faster
generic competition with wildcard exclusivity vouchers. A firm seeking to qualify
should file an application with the FDA, or other government body, forecasting
the future savings of a price-reduction. The estimated figure might reasonably be
derived by multiplying the difference between previous brand price and expected
generic price by volume, with volume calculated based on average prescription
volume per year multiplied by the number of years before patent expiration that
the price reduction occurs. If the projected savings resemble those typically
created by generic entry—discount of 20% in first 180 days and incrementally
increasing thereafter—the firm is rewarded with a wildcard exclusivity
voucher.124 To ensure material savings, the discount must reach the typical peak

120. U.S. GOV’T ACCOUNTABILITY OFF., supra note 105. 

121. Id. at 29.

122. Id.

123. Kurt Karst, “Wildcard Exclusivity” Returns: PCAST Recommends Consideration of a

Tradable Voucher to Reward Successful Antibiotic Development, FDA LAW BLOG (Sep. 29, 2014),

https://www.thefdalawblog.com/2014/09/wildcard-exclusivity-returns-pcast-recommends-

consideration-of-a-tradable-voucher-to-reward-successf/ [https://perma.cc/7BWV-PDU4].

124. Feldman & Frondorf, supra note 21, at 500-01.



2024] INCENTIVIZING DRUG AFFORDABILITY 145

generic discount—75-80%--at least 180 days prior to primary patent expiration.125

Once price drops occur, they may not be undone without repaying a sum equal
to projected savings. If actual savings fall short of forecasted savings, the firm
may be forced to pay a rebate equal to the difference between estimated and
actual savings. Thus, the savings number is essentially “locked in” and may be
relied upon by FDA/HHS in awarding the wildcard voucher. 

Like a PRV, the wildcard would be transferable (sellable), and this
transferability component would help increase R&D in addition to increasing the
value of the wildcard. If the firm that earns the wildcard has no product that
foreseeably stands to benefit from extended market exclusivity, obtaining a
wildcard remains valuable because the firm can sell the wildcard to another
manufacturer standing to benefit from its use. Thus, the value of transferability
is responsible for an indispensable portion of the wildcard’s ability to function as
an incentive. Because transferability is a significant flexibility advantageous to
brands and because wildcards indeed work to extend monopolies, several
limitations on wildcard usage would prohibit unreasonable extensions—often
attributable to pay-for-delay in the current environment—and ensure the wildcard
provides consumers with a net gain. 

(b) Risks and Mitigants

Several vulnerabilities must be addressed to ensure the program results in net
savings. The first important limitation to set on wildcard usage should be to
establish a maximum monopoly length that wildcard redemption can result in.
The feasibility of three sub-approaches to this limitation should be explored
further. The first sub-approach: prohibit wildcard use where it would result in
exclusivity greater than 14 years. The second: prohibit wildcard use where it
would result in an exclusivity period exceeding the average small-molecule or
biologic exclusivity period, as applicable. The average exclusivity period could
be calculated based on industry-wide inputs available in the FDA Orange Book.
The third and perhaps most straight forward sub-approach is to allow wildcard
redemption where it would result in “extended monopolies,” but prohibit usage
if it would result in a “long-monopoly.” Extended-monopoly drugs are drugs “for
which at least 12 years, but fewer than 16 years, have elapsed since the date of
approval of such drug.”126 Long-monopoly drugs are drugs for which greater than
16 years have elapsed since approval.127 One of these sub-approaches could be
adopted, or all three could be utilized on a case-by-case basis. Fact-specific, case-
by-case utilization of all three may be appropriate given significant differences
between biologics and small-molecule drugs (and between biosimilars and
generics for that matter)128 as far as R&D cost, value creation, and approval

125. Id.

126. 42 U.S.C. § 1320f-3(c)(4) (2022).

127. 42 U.S.C. § 1320f-3(c)(5) (2022).

128. Biologics are derived from living organisms, while small-molecule drugs are derived

from chemicals. Biosimilars are to biologics as generics are to small-molecule drugs. There are



146 INDIANA HEALTH LAW REVIEW [Vol. 21:121

pathways. Regardless of which method governs the cap on monopoly extension,
wildcards should never contribute to exceptional delays in competition and
unjustified prolonging of monopoly prices, which is the problem it seeks to
address.

Regarding another limitation, wildcards should not operate to create
uncertainty for generic firms. Wildcard redemption for a specific drug should
occur no later than two years after a drug’s initial FDA approval (or an alternative
deadline determined with input from generic subject matter experts or a notice
and comment period). Requiring the wildcard to be redeemed early in a product’s
market lifecycle provides visibility regarding the legal conclusion of brand name
monopolies. Generic firms must be able to reliably invest in the years-long
generic drug development process, without risk of being “blindsided” by a late
wildcard redemption.129 Allowing brands to bolt on exclusivity late in their
product’s exclusivity period would add uncertainty to the generic business model
that would disincentivize investment. Therefore, brand companies should be
estopped from redeeming wildcards after generic makers have materially invested
in the generic development process. Requiring prompt redemption of wildcards
protects the predictability essential to generic development.

(c) Preventing Abuse

The surface irony of addressing the problem with additional market
exclusivity must be overcome by eliminating the risk of abuse. Consider
circumstances where a firm facilitates generic competition or unilateral price
reduction, generates $5 in savings (derived by multiplying the difference between
the former brand price minus generic price by volume. Volume determined using
average prescription volume/year multiplied by the years prior to patent
expiration that the price reduction occurs.), and then sells the wildcard to a firm
which uses it to prolong monopoly sales, and thus cost, that exceed the savings
($5) originally generated. If unaddressed, this dynamic would completely
undermine the program. 

To eliminate potential for abuse, the FDA or other HHS agency must be
armed with broad discretion regarding acceptance of wildcard redemption.
Specifically, the government must be allowed to reject or otherwise block
wildcard redemption on the basis that wildcard attributable cost (the future
extended monopoly sales protected by wildcard redemption) exceeds wildcard
attributable savings (or forecasted wildcard attributable savings). Thus, a wildcard
should not be redeemable in situations where the cost of wildcard exclusivity

very meaningful differences between biosimilars and generics – for instance, biosimilars are not

covered by Hatch-Waxman. The substance of this Note is limited to generics and small-molecule

drugs, but a parallel application of the wildcard concept to biologics and biosimilars is worthy of

exploration.  

129. The Science of Biosimilars: Let’s See how Biosimilars are Developed, PFIZER (Aug.

2021) (comparing biosimilar development to generic development), https://www.pfizerbiosimilars.

com/biosimilars-development [https://perma.cc/KY6R-MURP].



2024] INCENTIVIZING DRUG AFFORDABILITY 147

exceeds the savings that earned the wildcard in the first place. The wildcard
program would create savings up front when the wildcard is awarded, before
creating costs later when the wildcard is redeemed to prolong market exclusivity
(i.e., monopoly prices), but the savings would exceed the cost—the program must
be qualified by a requirement that savings outweigh costs. 

Bound by the condition that wildcard savings exceed wildcard costs, parties
will navigate a process that safeguards this principle. To redeem a wildcard and
reap the benefits of monopoly extension, the redeemer should undergo a process
similar to that undertaken by the original wildcard awardee, whether it be the
same firm or a firm that purchased the wildcard from the original awardee.
Records of the savings generated or forecasted would exist on record as part of
the original wildcard voucher application. The party seeking to redeem the
wildcard should submit to the FDA or other designated federal body a wildcard
redemption application that forecasts wildcard attributable revenue. If the
redeemer’s forecasted wildcard attributable revenue exceeds the awardee-
generated wildcard attributable savings, the wildcard may not be redeemed
because the result would be higher net drug spending. 

Also in tandem with the front-end wildcard awardee application, the
redeemer on the back-end must attest that savings will outweigh costs. If savings
do not outweigh cost, the redeemer must be liable for any balance by which actual
wildcard costs exceed actual wildcard savings.

(d) Wildcards as the Optimal Incentive

Although novel and untested, wildcard exclusivity offers superiority over the
expansion of an already twice-expanded PRV program with onerous
administrative burdens and whose incentive value shrinks with each PRV issued.
Between the first and second drafts of this Note, the FDA has twice been unable
to satisfy priority review deadlines.130 Advocating for an indefinite number of
additional PRV issuances would be naïve in this climate, even if such a proposal
might achieve savings in optimal conditions. The wildcard, on the other hand,
requires no scientific review and spreads administrative burdens and costs among
parties. Regarding application information and forecasting data, synergies exist
on the applicant side as many firms will have sales projections and the estimated
impact of generic competition baked into an existing strategic plan or, with
respect to historical data, otherwise readily available in order to comply with SEC
reporting requirements. In short, the “ask” is lower for the FDA, and the value of
a wildcard on the balance sheet far outweighs the administrative cost absorbed by
the hopeful awardee or party seeking to redeem the wildcard.

Not only does the wildcard program not ask the FDA to condense a ten-
month process into six months, but the wildcard also fits the “transferable
exclusivity” profile which the pharmaceutical industry has a great appetite for and

130. Argenyx Receives Notification of PDUFA Date Extension for SC Efgartigimod, supra

note 114; Lewin, supra note 115.



148 INDIANA HEALTH LAW REVIEW [Vol. 21:121

expressly favors over PRVs.131  As proposed in this Note, the wildcard system
avoids a “ready-fire-aim” approach to granting monopoly extensions and is
tempered by limitations that define: (1) prerequisites for earning a wildcard, (2)
prerequisites for redeeming a wildcard, and (3) consequences of repayment, to be
imposed on awardees and redeemers who fail to consummate the savings
forecasted in wildcard award or wildcard redemption applications. Wildcards
have a dual effect—first a spending reduction, and then a spending increase—but
because the saving occurs and is recorded first, it can be ensured that the later
spending does not exceed the earlier amount saved, and thus that each wildcard
results in net savings. The goal of the program, and that of each wildcard issued,
is clear—accelerate price reduction and grow access. The obligation of awardees
and redeemers to fulfill the savings goal of each wildcard amounts to an insurance
policy against situations where, but for the drug maker’s obligation to pay off any
negative balance between projected and actual savings, wildcard attributable
spending would exceed wildcard attributable saving.

VIII. CONCLUSION

Delayed generic entry caused by the anti-competitive actions of players in the
pharmaceutical industry annually adds billions of dollars in cost to the U.S.
healthcare system.132 Attempts to quantify the annual burden have estimated a
range from $3.5 billion to $37 billion.133 The unnecessary cost of pay-for-delay
contributes to high prescription drug spending, which translates to poor health
outcomes for patients who avoid medication due to price.134 Attributable in part
to the complexity of the pharmaceutical industry (including positive use cases for
reverse payment settlements, citizen petitions, and other conduct described in a
negative light in this Note) and in spite of the dollar and personal health costs,
historic approaches to combatting pay-for-delay are limited and difficult to
enforce. This Note described two low-friction approaches—attractive to all
stakeholders and unlikely to encounter serious resistance—and ultimately
endorses a wildcard incentive program offering extended market exclusivity for
one drug, in exchange for shortened exclusivity for another drug, as long as
“wildcard attributable savings” exceed “wildcard attributable spending.” If the
incentive program proposed in this Note prevents just a quarter of the annual cost
of delayed generic competition from accumulating, billions of patient and public
dollars would be saved and more Americans could afford their prescriptions.
While appropriately limited to avoid unintended cost increases, transferable
wildcard exclusivity vouchers would remain highly valuable and therefore
successfully induce lower drug prices, either directly through unilateral price
reductions or indirectly through earlier generic entry.

The American public, and especially patients, collectively share the cost of

131. U.S. GOV’T ACCOUNTABILITY OFF., supra note 105.

132. Feldman, supra note 10, at 32-33.

133. Id.

134. KAISER FAM. FOUND., supra note 6.



2024] INCENTIVIZING DRUG AFFORDABILITY 149

pay-for-delay either directly or indirectly. Despite the practice’s notoriety,
victories in reducing pay-for-delay are few and far between. Of the examples of
progress discussed in this Note, most can be circumvented. Thus, instead of
attempting and failing to identify and punish wrong, lawmakers should reward
right. Rewarding innovators with a marketable asset, in exchange for facilitating
generic competition in monopoly markets, will bring cheaper drugs to patients
faster without deterring private investment in innovation. As a viable, positive-
sum solution, the proposed wildcard exclusivity program should be discussed and
expanded upon by policymakers, generic firms, innovator firms, and other
stakeholders. Refined with stakeholder input, a carefully implemented wildcard
exclusivity program may blaze a new trail on the pay-for-delay frontier and
produce an unprecedented symbiosis among generic and innovator companies.