Reverse-payment settlements between pharmaceutical companies have been vigorously challenged as antitrust violations, but the courts have usually found that such settlements are legal. However, that may change in the near future, as Congress and the Obama administration join the Federal Trade Commission (FTC) and others in attacking those settlements. Moreover, in view of efforts to reduce health care costs, the impaired reputation of pharmaceutical companies and their patents, and the Obama administration’s interest in more antitrust enforcement, it seems that significant momentum is building against reverse-payment settlements.
Reverse-payment settlements involve a payment from an innovator or brand-name pharmaceutical company to a generic pharmaceutical company as part of a settlement of patent litigation. Unlike most settlements, in which the defendant pays the plaintiff, in a reverse-payment settlement the plaintiff pays the defendant some consideration (including cash) to resolve the case. Such settlements arise due to the Hatch-Waxman Act’s regulatory framework, which provides that a generic company can seek approval of a generic drug based on the innovator’s clinical data.
