Reversing the Trend? The Possibility that Rule Changes May Lead to Fewer Reverse Payments in Pharma Settlements

Anne Layne-Farrar, Nov 01, 2009

This article begins by laying out a simple framework that makes obvious the incentives at play in generic drug entry, brand challenges, and settlements between the two. Once this common understanding has been established, several rule changes that have taken place are summarized one in the form of an amendment to Hatch-Waxman and another in a recent decision by the Court of Appeals for the Federal Circuit. These institutional changes may have the consequence of reducing the prevalence of reverse payments. This possibility suggests a different policy tact might be called for, one that shifts emphasis from determining whether or not reverse payments should be per se illegal to working with the incentives that firms already face and exploiting those incentives to reduce firms inclinations to enter into anticompetitive reverse-payment settlements.

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