The Supreme Court keeps coming out with major opinions in the biotech/pharma area, with today seeing a major blow to reverse-payment settlements wherein brand-name pharma companies pay generic companies to delay their entry into the market. This type of settlement shows the opposite pattern to that in most patent litigation, where the accused infringer (here, the generic drugmaker) usually pays the patent-holder, rather than the patent-holder paying the infringe, and is a result of the dynamics of generic drug market entry created by the Hatch-Waxman Act. Since reverse-payment settlements result in the generic agreeing to stay out of the market in return for payment from the patent-holding brand name company, they look like antitrust violations – the question is whether the involvement of a patent (which creates a monopoly) means the settlements are acceptable under antitrust law.
Today, the Supreme Court came down on the side of protecting competition and sticking with traditional antitrust doctrines. The Court didn’t go so far as to say that all reverse settlements are presumptive unlawful, instead requirings courts to apply a “rule of reason.” But the Court firmly rejected the idea that a reverse payment settlement is immune from attack as long as it falls within the nominal scope of the patent. The Court also noted that a large reverse settlement payment may itself provide evidence of a patent’s weakness, avoiding the need for a full determination of patent validity in the context of the antitrust action. The opinion is here.
Prof. Einer Elhauge and Alex Krueger wrote about the economics of this question last year; their article can be found here.
