Congress has identified the recent trend of pharmaceutical companies to settle patent litigation under “pay-for-delay” settlements or reverse payment settlements. Under these agreements, a generic maker receives a payment from a brand-name company in exchange for withdrawing the patent challenge and refraining from entering the market until an agreed date. Most courts have rejected antitrust challenges to this practice in view of exclusive rights of patent holders and general benefits from settlements. As part of the health care reform, Congress now proposes to treat “pay-for-delay” settlements as per se illegal and entirely ban the practice. The proposal, however, limits the ability to end uncertain and costly litigation and is thus likely to discourage patent challenges and eventually harm the consumer. Congress should replace the per se illegal treatment with a quick look balancing approach to permit settlements if an antitrust analysis reveals its pro-competitive effects.
Yuki Onoe, “Pay-For-Delay” Settlements in Pharmaceutical Litigation: Drawing a Fine Line Between Patent Zone and Antitrust Zone, 9 J. Marshall Rev. Intell. Prop. L. 528 (2009)