Whistling Past the Graveyard: The Problem with the Per Se Legality Treatment of Pay-For-Delay Settlements

Michael Kades, Nov 01, 2009

Arguably, the most important debate in antitrust jurisprudence involves pay-for-delay patent settlements in which the brand company pays the generic to stay out of the market. As a matter of economics, it will generally be most profitable if the brand and the generic firm avoid the possibility of competition and share the resulting monopoly profits; however, such settlements will reduce competition and increase the costs of drugs. If pay-for-delay settlements are legal, parties will enter them to the detriment of consumers. Current cases, in particular the Tamoxifen and Ciprofloxacin decisions, however, have gone a long way towards adopting just such a standard, a standard that is already having an effect. By adopting an approach without regard to its implications or erroneously suggesting that pay for delay settlements are an ineffective way to delay competition, courts are essentially whistling past the graveyard.

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