Pharmaceutical ‘Pay-for-Delay’ Reexamined: A Dwindling Practice or a Persistent Problem?

By Laura Karas, Gerard Anderson (Johns Hopkins University), & Robin Feldman (University of California)

The Supreme Court ruled in FTC v. Actavis that a delay in generic entry may be anticompetitive when part of a patent settlement that includes a large and otherwise unjustified value transfer to the generic company, termed a reverse payment patent settlement, or “pay-for-delay.” Following Actavis, drug companies have limited the size of reverse payments and have fashioned settlement terms that include more discreet categories of compensation to generic companies. In light of the fact that such settlements retain the potential for anticompetitive effects, the apparent size of the reverse payment may no longer be a useful gauge of the legality of pay-for-delay deals. In this article, we argue that convoluted settlements in the post-Actavis landscape that camouflage value transfers from brand-name to generic companies necessitate a shift in the focus of antitrust scrutiny to the existence of any restriction on generic entry together with a category of patent less likely to survive a challenge. We conclude with a discussion of pay-for-delay bills in the 116th Congress and propose several reforms to deter pay-for-delay behavior.

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