•  
  •  
 

Abstract

“Pay-for-delay” settlements, also known as reverse payments, arise when a generic manufacturer pursues FDA approval of a generic version of a brand-name drug. If a patent protects the brand-name drug, the generic manufacturer has the option of contesting the validity of the patent or arguing that its product does not infringe the patent covering the brand-name drug. If the generic manufacturer prevails on either of these claims, the FDA will approve its generic version for sale. Approval of a generic version of a brand-name drug reduces the profitability of the brand-name drug by forcing the brand-name manufacturer to price its product competitively. Thus, under a typical pay-for-delay arrangement, the brand-name manufacturer avoids the risk of competition by paying the generic manufacturer to keep its product off the market, often for the remainder of the brand-name drug’s patent term. The FTC estimates that this practice costs consumers billions of dollars in the form of increased prescription drug prices. In June of 2013, the Supreme Court rendered its decision in FTC v. Actavis, Inc, which addressed whether this type of arrangement violates federal antitrust law. In Actavis, the Court held that pay-fordelay settlements should be scrutnized under rule of reason antitrust analysis to determine whether a particular settlement unreasonably diminishes competition. This Note argues that the Actavis holding will not effectively address anticompetitive settlements in the pharmaceutical industry, and proposes a regulatory solution to the problem of payfor- delay settlements.