ASCOLA Competition Law series
Edited by Josef Drexl, Warren S. Grimes, Clifford A. Jones, Rudolph J.R. Peritz and Edward T. Swaine
Chapter 11: Three Statutory Regimes at Impasse: Reverse Payments in Pay-for-Delay Settlement Agreements between Brand-name and Generic Drug Companies
Rudolph J.R. Peritz Bayer AG recently paid $398 million to generic competitors in exchange for their promise to stay off the market for Ciprofloxacin for the next six years.1 Cipro, as it is called, is a widely used antibiotic. In these agreements to settle patent infringement cases, Bayer made reverse payments – so called because they were paid by the plaintiff patent holder to the accused infringers.2 There is outrage in the United States over these pay-for-delay agreements. President Obama’s proposed budget declares that his ‘administration will prevent drug companies from blocking generic drugs from consumers by prohibiting anticompetitive agreements and collusion between brand name and generic drug manufacturers intended to keep generic drugs off the market.’3 The most recent Bill to prohibit such settlement agreements has recently been sent to the United States Senate from the Judiciary Committee.4 The public outrage and political responses 1 In re Ciprofloxacin Hydrochloride Antitrust Litigation, 363 F Supp 2d 514 (EDNY 2005), aff’d, 544 F.3d. 1323 (Fed. Cir. 2008). 2 Useful treatments of this subject include CS Hemphill, ‘Paying for Delay’ (2006) 81 NYU L Rev 1553; C Shapiro, ‘Antitrust Limits to Patent Settlements’ (2003) 34 Rand J Econ 31; M O’Rourke and JF Brodley, ‘An Incentives Approach to Patent Settlements’ (2003) 87 Minn L Rev 1767; M Carrier, ‘Unsettling Drug Patent Settlements: A Framework for Presumptive Illegality’ (2009) 108 Mich L Rev 37. 3 http://www.whitehouse.gov/omb/fy2010_key_healthcare/ (accessed November 2009). 4 Reported in ‘Senate Judiciary Committee Approves Bill Banning Reverse Payment Agreements’...
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