Reverse Payment Settlements Research Articles

Regulating Reverse Payment Agreements in Pharmaceutical Market: A Comprehensive Framework for Antitrust Review

Reverse payment settlement agreement is a type of arrangement between original and generic drug manufacturers that could potentially violate Antitrust Laws by limiting competition, typically appear in the pharmaceutical market. This paper addresses the impact of these agreements on public interests, and the challenges in conducting antitrust review on these agreements. This paper then proposes a comprehensive framework for regulating reverse payment agreements in the context of China’s extensive and complex pharmaceutical market by drawing on the experiences of the United States and the European Union. The framework introduces a two-step antitrust review system for regulating patent settlement agreements, which is suggested by the author to be applied in both patent litigation and daily detection. This paper also advocates establishing an agreement filing system and utilizing the antitrust public interest litigation system in antitrust regulation. This proposed framework provides specific guidance on initiation of antitrust review with respect to multiple backgrounds, in order to protect consumer interests in affordable healthcare, deter anti-competitive behavior, and contribute to the theoretical basis for future legislation.

Anti-Monopoly Review of Pharmaceutical Reverse Payment Settlements in Patent Infringement Cases in China

Anti-Monopoly Review of Pharmaceutical Reverse Payment Settlements in Patent Infringement Cases in China

Reverse-Payment Settlements Under EU and US Patent Law: Convergence in Remedies

Abstract This paper investigates the existing case law on reverse-payment settlements from a comparative perspective, focusing on the US and EU panoramas. In this respect, we will illustrate the emergence of patent-related proxies in the anticompetitive assessment, which contaminate the antitrust benchmarks in a problematic way, with the effect of hampering patent law and policy. Primarily we will delve into seminal decisions in the EU framework. In this regard we will observe how the Court of Justice of the European Union (CJEU) shifted from a quick-look approach towards a case-by-case antitrust analysis of patent settlements, progressively neglecting, but not eliminating, patent-related presumptions. Then we will look at the fragmented US case law scenario. We will explore the various benchmarks deployed to challenge these agreements, highlighting the differences and similarities with the EU approaches. It will be concluded that a strong IP-law-based perspective about these agreements has arisen in both legal systems. This perspective orientates the anticompetitive assessment through quasi-absolute presumptions, hindering the consistency of competition law remedies and misrecognising the cruciality of patent law and policy. Therefore, we will try to outline that the intermingling of criteria adopted to scrutinise reverse-payment settlements and similar over-exclusionary strategies is pernicious under both antitrust and patent law.

Selected Developments in Biotechnology Law and the Biotechnology Industry

Selected Developments in Biotechnology Law and the Biotechnology Industry

By Object or Effect Restrictions—Reverse Payment Settlement Agreements in light of Lundbeck, Servier, and Generics

By Object or Effect Restrictions—Reverse Payment Settlement Agreements in light of Lundbeck, Servier, and Generics Bernadette Zelger Bernadette Zelger Search for other works by this author on: Oxford Academic Google Scholar Journal of European Competition Law & Practice, Volume 12, Issue 4, April 2021, Pages 273–283, https://doi.org/10.1093/jeclap/lpaa089 Published: 15 December 2020 Article history Received: 16 September 2020 Revision received: 01 October 2020 Accepted: 30 October 2020 Published: 15 December 2020

On the Application of Nash Bargaining in Reverse Payment Cases in the Pharmaceutical Industry

Some applications of Nash bargaining in the antitrust analysis of reverse payment settlements estimate the bargaining power parameter as the split of the surplus in the actual settlement with alleged reverse payments. This estimated parameter is then used as the bargaining power parameter in the but-for world where reverse payments are prohibited. We demonstrate that this approach is incorrect. Indeed, in the but-for world there could theoretically be an alternative “no payment” settlement where reverse payments are prohibited. However, the prohibition on reverse payments disproportionately affects the shape of the bargaining set in favor of the patent holder. With this asymmetry in the bargaining set, the estimated “bargaining power” in the actual world (with a settlement) no longer accurately reflects the split of the surplus that would have been agreed during the but-for negotiation with no payments. Moreover, we find that keeping the split of the surplus constant between the actual and but-for worlds is not innocuous because it overestimates the extent of alleged generic delay.

Event Study Analysis in Cases with Multiple Brand-Generic Reverse-Payment Settlements

Event studies of stock price movements have been used to assess the anticompetitive impact of ‘reverse-payment’ settlement of patent disputes in the drug industry. Evidence for an anticompetitive effect is found when financial markets reward a brand manufacturer with larger stock market capitalization – signaling the agreed upon generic entry date was more profitable (i.e. later) than investors’ expectations. In practice, reverse-payment cases can involve multiple generic competitors and settlements. This paper considers how event-study methodology applies in such cases, with a study of the stock price movements of Cephalon, manufacturer of the drug Provigil. Cephalon entered into four patent litigation settlements with potential generic competitors over a two-month period beginning in December 2005. Event study methods can readily be applied to such a case. Cephalon’s total increase in stock value across four narrow windows around each settlement totaled over $1.0 billion, indicating the agreements delayed generic entry beyond the market's expectation.

SERVIER V COMMISSION: FOLLOWING IN THE FOOTSTEPS OF LUNDBECK

To download this paper please click https://discovery.ucl.ac.uk/id/eprint/10086919In 2009, the European Commission’s Competition Inquiry into the Pharmaceutical Sector focused on the competitive relationship between originator companies and generic undertakings. The Commission discovered that patent settlement agreements containing a reverse transfer of value from the originator to the generic undertaking were used to delay entry of generics into markets, limit consumers’ choices, and burden public budgets. Since the Inquiry, the Commission adopted a more aggressive enforcement approach towards these patent settlements. In the recent Servier decision, it determined that the relevant agreements were in breach of Articles 101 and 102 TFEU. This commentary assesses the merits of Lundbeck’s general rule on reverse payment settlements, evaluates the General Court’s review of that decision in Servier and the exemption created for licensing agreements, and illustrates the difficulties in defining the relevant market for pharmaceutical products.

Pay for Delay Agreements: Antitrust Watch Intensifies

The pharmaceutical sector has constantly endeavoured to balance its dual objectives of promoting state-of-art innovation and achieving affordable healthcare for all. The contrasting aims are also germane to the inevitable conflict between the competition law and the patent law with respect to this sector. Reverse payment settlement is one such concept that lies at the cross-section of these two legislations and strangely offers an uncanny mechanism where extreme partisans (i.e., innovator and generics) become comrades, thereby prodding genuine concerns and exposing legal vulnerabilities of such agreements. Against this backdrop, this article seeks to examine the growing undercurrent re reverse payment settlement agreements from a competition law perspective. In an attempt to harmonize the conflicting policy objectives, it will study the interplay between patent law and competition law by placing reliance on the approach followed by other jurisdictions. Further, this article will also assess whether reverse payment settlement agreements fall within the statutory construct of the Competition Act, 2002 and whether the Competition Commission of India (“CCI”) can assert its jurisdiction over such agreements. An attempt is also made to outline the approach which the CCI could adopt, bearing in mind the importance of ensuring exclusivity as an incentive for innovation.

"Pay for Delay": Legitimate Conduct to Defend Valid Patent Rights or Anticompetitive Behaviour?

Originator and generic drug manufacturers frequently settle patent litigation on terms that include a payment to the generic manufacturer in return for the generic to delay entry into the market. These reverse-payment settlements extend the originator's market exclusivity and can amount to anticompetitive divisions of the market. Proponents of such settlements emphasise the reverse-payment as a legitimate business response to the risks associated with litigation. While reverse-payment settlements have raised considerable debate in the pharmaceutical field in both the United States and the European Union, competition authorities in New Zealand are yet to address this issue. Against this background, this article seeks to analyse the compatibility of such settlements with New Zealand competition law, in particular with ss 27 and 36 of the Commerce Act 1986. Given the diversity of such agreements, it is unclear whether New Zealand competition law is adequate to curtail reverse-payment settlements.

William Howard Taft, the Origin of the Rule of Reason, and the Actavis Challenge

The origin of the Rule of Reason can be traced to the notable decision of United States v. Addyston Pipe & Steel Co. (1898), which was written by William Howard Taft during his tenure on the Sixth Circuit Court of Appeals. There, Judge Taft distinguished between restraints that were mainly or entirely designed to restrain trade and those that are ancillary to a procompetitive main purpose. That fundamental distinction, drawn at the dawn of Sherman Act jurisprudence, forms the basis of the Rule of Reason that currently informs antitrust case law. This Article describes the context in which the Rule of Reason was debated and defended both in public discourse by President and Professor Taft and in the landmark Supreme Court decisions of Standard Oil Co. of New Jersey v. United States (1911) and United States v. American Tobacco Co.(1911). This Article then follows the development of the Rule of Reason through Board of Trade of City of Chicago v. United States (1918) to the modern era of antitrust jurisprudence. Finally, this Article describes the application of the Rule of Reason to reverse-payment settlements in the pharmaceutical sector, one of the most challenging contemporary antitrust issues. It does so through a discussion of the Supreme Court case FTC v. Actavis (2013) and the Third Circuit’s application of Actavis in In re Wellbutrin Xl Antitrust Litig. Indirect Purchaser Class (2017). This Article provided the foundation for, and introduction to, the remarks of Professor Michael A. Carrier and Mr. Saul Morgenstern that were delivered at the New York State Bar Association Antitrust Law Section’s William Howard Taft Lecture on September 28, 2017. Those remarks are reprinted in article form in this volume of the Columbia Business Law Review.

The Federal Trade Commission’s Hearings on Competition and Consumer Protection in the 21st Century, Reverse-Payment Settlements, Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University

The Federal Trade Commission’s Hearings on Competition and Consumer Protection in the 21st Century, Reverse-Payment Settlements, Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University

The Hatch-Waxman Act, Post-Grant Review, and the PTAB: A New Sort of Competition

In FTC v. Actavis, the Supreme Court declined to adopt a rule making reverse payment settlements per se unlawful under the antitrust laws. Instead, the Court concluded that such settlements could be unlawful under the rule of reason. The Court’s decision further fueled an already-existing debate about the proper treatment of various elements of reverse payment settlements under the antitrust laws. This debate suggests that the Actavis decision has not fully resolved the “turducken” problem presented by these sorts of cases. Difficult questions of antitrust law remain contained within what ultimately began as a patent lawsuit. In addition, it suggests that settlements will not necessarily become any less likely, but instead may become more complex in order to obfuscate the purpose and value of the settlement. As a result, the public will continue to be deprived of the benefit of having a determination as to the validity of the underlying patent claims. And consumers will continue to be harmed by sustained and illegitimate monopoly prices.This Article finds hope in the new inter partes review (IPR) procedure before the Patent Trial and Appeal Board (PTAB) introduced as a part of the America Invents Act (AIA). The IPR procedure offers a few benefits: a faster determination; litigation proceeding in parallel to district court litigation, which can effect competition among tribunals as well as competition among generic drug manufacturers seeking FDA approval; and a more favorable standard for interpreting patent claims.But these features alone are not enough to deter settlement and effect earlier generic entry, so this Article proposes a few additional changes. First, I propose that the PTO issue a rule requiring that, whenever the patent claims at issue cover a drug already approved for marketing by the FDA, the PTAB be required to proceed to a final written decision, regardless of whether the parties settle. Second, I propose that the Hatch-Waxman Act be amended to make the 180-day exclusivity period contestable, such that it may be awarded to the applicant for FDA approval that first obtains a determination, whether before a federal district court or the PTAB. Third, and finally, I propose that the Hatch-Waxman Act be amended so that determinations by the PTAB invalidating patent claims effect the same consequences as a federal district court determination invalidating a patent.

'Pay for Delay': Legitimate Conduct to Defend Valid Patent Rights or Anticompetitive Behaviour?

Originator and generic drug manufacturers frequently settle patent litigation on terms that include a payment to the generic manufacturer in return for the generic to delay entry into the market. These reverse-payment settlements extend the originator’s market exclusivity and can amount to anticompetitive divisions of the market. Proponents of such settlements emphasise the reverse-payment as legitimate business rationale in response to the risks associated with litigation. While reverse-payment settlements have raised considerable debate in the pharmaceutical field in both the United States and the European Union, competition authorities in New Zealand are yet to address this issue. Against this background, this paper seeks to analyse the compatibility of such settlements under New Zealand competition law, in particular the applicability of section 27 and section 36 of the Commerce Act 1986. Given the variability of such agreements, it is unclear whether New Zealand competition law is adequate to curtail reverse-payment settlements.

Reverse Payment Patent Settlements in the Pharmaceutical Sector Under EU and US Competition Laws: A Comparative Analysis

Within the tool-box developed by originator companies in order to prepare and respond to generic entry, a prominent position must be recognized to a category of patent strategies particularly controversial under antitrust scrutiny, i.e. patent settlement agreements, in particular in the form of reverse payment patent settlements (also called pay-for-delay settlements), due to the fact that they provide for the patentee to pay the alleged infringer, rather than the opposite, with the aim of delaying its market entry. It is a fact that reverse payment settlement agreements arise mainly in the pharmaceutical industry. The article firstly analyses US and EU regulatory frameworks in order to highlight similarities and differences between them. Then, it examines the relevant case law in both contexts with a view to conducting a comparative study. Finally, the article discusses the approaches to reverse payment patent settlements adopted by antitrust authorities and courts and their clashes with intellectual property law, and contains a final proposal for the assessment of these agreements.

Antitrust and Patent Law Analysis of Pharmaceutical Reverse Payment Settlements

Suppose that a widget patentee observes incipient competition from a rival producer and files an infringement action. This lawsuit could be settled by (1) the infringement defendant's purchase of an exclusive or nonexclusive license from the patentee, followed by the defendant's production under the license; or (2) the infringement plaintiff's purchase from the defendant of a promise that the defendant abandon its entry plans. Alternative (1) brings a new rival into the market. It can bring production closer to the competitive level, depending on whether the license is price- or quantity-restricted. It can also encourage further innovation in the market by giving two companies an incentive to improve on the widget. By contrast, alternative (2) keeps the rival out of the market and induces it to drop its suit in exchange for a payment. There are competitive reasons for favoring inclusive rather than exclusive settlements. Outside the context of the Hatch-Waxman Act and pharmaceutical patent disputes, settlements of the second type are very rare. Settlement agreements that involve a reverse payment plus the infringement defendant's abandonment of the market do not involve a license of any IP right at all. If the dispute is settled by a payment from the defendant to the plaintiff in exchange for the defendant's right to produce under the patent, the settlement is a license. Most IP settlements result in the creation of a license, and the proper scope of such licenses is a legitimate IP concern. By contrast, if the dispute is settled by the infringement plaintiff's payment to the defendant to stay out of the market, there is no license, and thus the policy of the Patent Act encouraging licensing is not invoked. This fact justifies closer scrutiny of exit payments. Potentially anticompetitive IP settlements are entitled to deference when they involve the creation of IP licenses whose scope must be assessed against competitive risks. But when no license is created, no such deference is needed. 3

Pharmaceutical Patent Wars, Reverse-Payment Settlements, and Their Anticompetitive Effects for Consumers

Generic drugs have been provided considerable cost-savings to consumers. The Hatch-Waxman Act provides economic incentives to both generic and brand-name manufacturers, but it is a complicated piece of legislation scattered across numerous sections of the United States Code. This obfuscation has led to abuse by brand name and generic drug manufacturers, resulting in anticompetitive behaviors for the consumer. Despite attempts to ameliorate the problem, a review of case law makes plain that the judicial and legislative systems are currently inadequate to address this problem. Litigation typically arises in the context of patented drug filings after a generic drug manufacturer files an Abbreviated New Drug Application for a generic drug modeled after the patented drug, an act of constructive patent infringement. This then initiates paragraph IV patent litigation. In order to avoid a finding of patent invalidity, branded and generic manufacturers have entered into collusive “reverse-payment” agreements in which the branded manufacturer agrees to pay the generic company to stay out of the market. While direct cash payments seem to have been foreclosed in FTC v. Actavis, subsequent iterations of reverse payments have evaded this holding, allowing reverse payments to continue to the frustration of many consumers. Finally, the latest mode of manipulation does not involve monetary transfers, but rather manipulates the FDA system via product hopping, risk evaluation monitoring systems, and sham citizen petitions, to achieve anticompetitive aims. This articles examines the patenting system for generic drugs, the numerous modes of reverse-payment, particularly with the difficulty of prescribing a bright-line approach to often fluid definitions of “reverse payments.” This is the first article to review the array of reverse payment modes, explaining how legislative and judicial efforts to combat these practices have failed, and arguing for a systemic legislative approach to solving this problem.

Pay-for-Delay Agreements in the EU Pharmaceutical Industry

This article analyses the compatibility of pay-for-delay agreements with Article 101 of the Treaty on the Functioning of the European Union, in light of the recent judgment of the General Court in H. Lundbeck A/S and Lundbeck Ltd v European Commission. These commercial agreements, also known as reverse payment settlements, are characterised by a value transfer from the originator to generic companies, which results in a delay in generic market entry. The European Commission first examined pay-for-delay agreements in the Pharmaceutical Sector Inquiry in 2009, instituting an annual patent settlements monitoring exercise and initiating proceedings against a number of pharmaceutical companies, imposing fines totalling over €580 million. In September 2016, the General Court confirmed the decision of the Commission against Lundbeck, holding that the generic undertakings involved in the pay-for-delay agreements were potential competitors of the originator company and that the agreements constituted restrictions of competition by object. The seminal decision of the court adds strength to the arguments used by the Commission in its pay-for-delay investigations, providing an apparently coherent legal framework for the assessment of these agreements. However, significant uncertainty remains in relation to the application of key concepts of competition law in the pay-for-delay context.

독점규제법상 역지불합의의 위법성 판단

독점규제법상 역지불합의의 위법성 판단

Pay for Go-Away: Reverse Payment Settlements and Holdup Under PTAB

The Patent Trial and Appeal Board (PTAB) is an administrative forum in which parties can challenge the validity of granted patents at relatively low cost. Although efficient in most respects, PTAB may be exploited as a platform for striking potentially-anticompetitive “reverse payment” settlements – agreements in which a monopolist-patentee pays a potential entrant to terminate its challenge and stay out of the market. The Supreme Court recently held that such agreements may violate the antitrust laws. Although they are usually observed as litigation settlements, we provide empirical evidence suggesting they occur in PTAB petitions between generic drug makers and brand-name drug sellers. Although settlement terms are always confidential, we use data from the FDA’s “Orange Book” to infer whether the generic-petitioner received a patent license in the settlement. If it did not, then we infer a strong likelihood of reverse payment. About 75% of applicable PTAB settlements satisfy this inference criterion. We offer a number of proposals for policing reverse payment settlements in PTAB.We also address the so-called “reverse patent troll” phenomenon. These are non-operating companies that use PTAB purely as a holdup device for extracting reverse payments from patentees. The practice appears rare, and is unlikely to be viable as a standalone business model, although it may be lucrative if employed selectively under certain (rare) conditions. We propose a rule that would deter attempts to exploit PTAB as holdup device, but would not discourage good faith petitions.