The anti-monopoly regulation of reverse payment patent settlement agreements in the pharmaceutical industry in China*

Abstract

ABSTRACT In recent years, the legality of reverse payment patent settlement agreements (RPPSAs) in the pharmaceutical industry has become a contentious issue and attracted the attention of antitrust authorities in many countries. It is a sophisticated intersection of patent protection — encouraging research and development in the pharmaceutical industry — and competition enforcement — maintaining fair and effective competition in the relevant market. Given the complexities, there is no unanimous approach adopted to deal with the compatibility of such RPPSAs with antitrust law. As China’s legal and economic context has changed considerably, there will be great possibility that such RPPSAs will also appear in China. However, there has not been an effective anti-monopoly analysis framework established that focuses on regulating such RPPSAs in China. Therefore, this article proposes that China should prepare itself in advance from two perspectives. On the one hand, a competition inquiry should be conducted in China’s pharmaceutical industry to evaluate the development of RPPSAs; on the other hand, a basic analysis approach should be confirmed in the forthcoming anti-monopoly guidelines for intellectual property rights (IPRs). This article proposes that the anti-monopoly scrutiny should mainly focus on the patent settlement agreements with value transfer from a brand-name drug company to a generic one in exchange for the latter’s commitment to delay market entry. Then, China’s Anti-monopoly Law should be applied differently on the basis of the timing at which the generic drugs are permitted to enter the market. Finally, this article provides some important and typical factors of RPPSAs that should be examined carefully.