Analysis Group Team Publishes Article on Why Stock Price Movements Are Not a Viable Substitute for 'Rule of Reason' Analysis in Evaluating 'Reverse Payment' Settlements
July 21, 2016
Analysis Group (AG) Managing Principals Pierre Cremieux and Paul Greenberg and Vice Presidents Ted Davis and Mark Lewis recently published an article in Law360 in which they comment on the use of stock market evidence to determine whether a 'reverse payment' settlement may be anti-competitive.
The article, “Stock Prices Aren't Enough For 'Rule Of Reason' Analysis,” takes a close look at a recently published assertion that an increase in the patent-holder's stock price following announcement of a settlement is sufficient to establish anti-competitive effects of that settlement. The AG authors explain that this simple approach fails to adequately account for the favorable impact of reduced risk on investors' valuations following such settlements. They show, by way of an example, that a stock price increase on its face does not demonstrate that a settlement is anti-competitive. Rather, it is necessary to undertake a rigorous evaluation of the underlying determinants of such a price increase. They conclude that analysis of stock price movements may be informative, but a blanket application of this approach is flawed and cannot be a “shortcut” to the traditional analysis of reverse payment settlements required by the Supreme Court's Actavis decision.