Analysis Group Experts File Amicus Curiae Brief Regarding Issues in the Antitrust Treatment of Pharmaceutical Patent Infringement Settlements

September 10, 2015

On August 27, 2015, a group of prominent economists that included Analysis Group senior staff members Bruce Stangle, Paul Greenberg, Pierre Cremieux, and George Kosicki, and academic economists James Hughes, Keith Hylton, Edward Snyder, and Michael Wohlgenant, filed an amicus curiae -- or friend of the court -- brief with the U.S. Court of Appeals for the First Circuit in the Loestrin 24 Fe Antitrust Litigation. At issue in this litigation is the proper interpretation of the U.S. Supreme Court's 2013 decision in FTC v. Actavis, which established that so-called reverse payment settlements between brand and generic manufacturers should be subject to antitrust scrutiny under the rule of reason. In particular, the brief addressed "the economics of two features of the Loestrin settlement that, to date, have not been addressed by courts reviewing alleged reverse payment settlements post-Actavis."

The first area of focus in the brief is the proper treatment of "acceleration clauses" in settlements. In this context, an acceleration clause is a provision that allows an individual patent challenger to enter with its generic product prior to an agreed upon settlement date in the event of earlier entry by another generic company. The authors note that acceleration clauses are "common in patent settlements" and are often "necessary to achieving the settling parties' expectations." Rather than impede competition, the authors argue that an acceleration clause "enhances competition by facilitating settlement and entry by more competing generic firms."

The second area of focus in the brief is "the antitrust treatment of settlements that exchange fair value." In particular, the authors note that to facilitate settlement, a generic manufacturer often agrees to provide the patent holder with ancillary products, services, or benefits such as exclusive licenses for products, backup product supply, or joint marketing commitments. The authors argue that such commitments raise no antitrust concern if the alleged payment from the patent holder to the generic represents a fair value exchange for these commitments. Relative to continued litigation, the authors point out that "settlements are a more reliable and lower-cost mechanism for achieving generic entry before patent expiration." Furthermore, the cost savings and additional certainty created by settlements encourages more efficient research, development, and marketing by the brand company, thus helping to maintain the balance of incentives for new drug development and generic entry that was intended under the Hatch-Waxman Act.

Read the amicus curiae brief