Reverse payment settlements or “pay-for-delay agreements” between originators and generic drug manufacturers create heated debates regarding the balance between competition and intellectual property law. These settlements touch upon sensitive issues such as timely generic entry and access to affordable pharmaceuticals and also the need to preserve innovation incentives for originators and to strengthen the pipeline of life-saving pharmaceuticals. This book is one of the first to critically and comparatively analyse how such patent settlements and various other strategies employed by the pharmaceutical industry are scrutinised by both United States (US) and European courts and enforcement authorities, and to discuss the applicable legal tests and the main criteria used for their assessment. The book’s ultimate objective is to provide guidance to the pharmaceutical industry regarding the types of patent settlements, strategies and conduct which may be problematic from US antitrust and European Union (EU) competition law perspectives and to assist practitioners in structuring settlements which are both efficient and compliant. To this end, an exhaustive legal analysis of some of the most controversial issues regarding pharmaceutical patent settlements is provided, including: – the lengthy split among US Circuit Courts on the issue of pay-for-delay settlements, its resolution by the US Supreme Court in FTC v. Actavisand subsequent jurisprudence; – the decision of Lundbeck v. Commissionby the European General Court and the Servier decision of the European Commission; – the Roche/Novartisdecision of the European Court of Justice and the most important decisions by National Competition Authorities on pharma patent settlements in the EU; – an overview of other types of strategies such as product-hopping and product reformulations, no-authorised generic commitments, problematic side-deals, mechanisms affecting generic substitution; – the rejection of the “scope of the patent” test in both the US and the EU and the balancing of patent law and antitrust law considerations in the prevailing applicable tests; – the benefits of settlements and the main criteria for assessing their legitimacy under US antitrust and EU competition law. The analysis provides concrete examples of both illegitimate and legitimate settlements and strategies, emphasising on conduct that falls within a grey zone and on the circumstances and criteria under which such conduct could be deemed problematic from an antitrust perspective. This book will serve as a valuable guide for pharmaceutical companies wishing to minimise the risk of engaging in conduct that could potentially infringe US antitrust and EU competition law. It further aims to save courts and enforcement agencies and also practitioners and academics considerable time and resources by providing an exhaustive analysis of the relevant caselaw, with the ultimate goal to increase legal certainty on the most controversial aspects of patent settlements in the pharmaceutical industry.

Within the tool-box developed by originator companies in order to prepare and respond to generic entry, a prominent position must be recognized to a category of patent strategies particularly controversial under antitrust scrutiny, i.e. patent settlement agreements, in particular in the form of reverse payment patent settlements (also called pay-for-delay settlements), due to the fact that they provide for the patentee to pay the alleged infringer, rather than the opposite, with the aim of delaying its market entry. It is a fact that reverse payment settlement agreements arise mainly in the pharmaceutical industry. The paper firstly analyzes US and EU regulatory frameworks in order to highlight similarities and differences between them. Then, it examines the relevant case law in both contexts with a view to conducting a comparative study. Finally, the paper discusses the approaches to reverse payment patent settlements adopted by antitrust authorities and courts and their clashes with IP law, and contains a final proposal for the assessment of these agreements.

In recent years, reverse patent settlement agreements -- whereby a patent holder pays or gives other forms of value to an infringer in order to avoid or to settle patent litigation -- have raised considerable debate in the pharmaceutical field in both the United States and the European Union, with the antitrust authorities and courts reaching different conclusions as to their compatibility with competition rules. In the United States, the Supreme Court addressed this matter in the Actavis case, in which it determined that reverse patent settlements should be assessed under the “rule of reason.” In contrast, the European Commission in its Lundbeck decision considered that reverse patent settlements were per object restrictions of EU competition law and therefore the effects of such agreements did not need to be analyzed. This decision is, however, being appealed before the General Court of the EU. In its more recent Servier decision, the Commission has modified its approach as, while it declared that the reverse patent settlements in question were per object restrictions, it also demonstrated that these agreements had anticompetitive effects. Against this background, we contrast the approaches taken in the US and the EU with respect to reverse patent agreements, and assess which approach makes the most sense. We also address a number of important questions, which are being looked at by lower courts in the US and may also be relevant in the EU.

Editors --Contributors --Foreword --Preface --Pharmaceutical Patents and Competition Issues --What Is Going on in National Systems?

This book provides a systematic analysis of the law and practice of EU competition and trade in the pharmaceutical sector. Authored by leading private practitioners, economists, scholars and high-level officials at competition regulators, this work provides valuable insider knowledge on the application of law and policies to the pharmaceutical industry. The work contains extensive commentary on the legislation and the latest case law and administrative precedents in this sector, at both EU and national level, including certain significant jurisdictions (e.g., the US, China). Coverage of various key developments includes the recent pay-for-delay antitrust investigations, the perennial issues around parallel trade, and an examination of mergers among pharmaceutical companies and medical devices manufacturers. In addition to the legal analysis, it offers vital economic and business perspectives to ensure that the reader has the full range of tools with which to prepare for cases and conduct transactions within the pharmaceutical industry.

Patent settlements between originator and generic firms in the pharmaceutical industry are a controversial topic, both in EU competition policy and U.S. antitrust law. The main concern is that patent settlements, which involve large payments from the originator to generic firms (reverse payments) and simultaneously restrict or delay market entry of generic firms, might have to be regarded as anti-competitive agreements that protect weak and perhaps unjustified patents from challenges. Therefore, certain types of patent settlements might harm consumers, both by defending unjustifiable patents and restricting competition by generic firms. In this article, we use the dispute in U.S. antitrust law between the U.S. antitrust authorities and various U.S. courts about how to deal with patent settlements with reverse payments as a starting point for an economic analysis of this problem. We particularly focus on two aspects: (1) Patent settlements have also to be seen as potentially endangering the already weak mechanisms within patent law for challenging and weeding out weak patents. (2) The incentives for originator and generic firms for negotiating patent settlements depend crucially on the entire institutional framework in pharmaceutical markets. Therefore, the competitive assessment of patent settlements requires the analysis of the interplay between patent law rules, the regulations for drug approval (FDA regulations in the U.S.), antitrust law rules, and, in the U.S., the Hatch-Waxman Act with its specific rules for the relation between originator and generic firms. Important conclusions are the need for a much deeper analysis of this interplay of different regulations, and the insight that the U.S. criteria for assessing patent settlements might not be directly transferable to the EU, due to different institutional frameworks for pharmaceutical markets.

The paper studies the Lundbeck patent settlement antitrust case of the European Commission from an economic perspective. The Commission concludes that the agreements in Lundbeck involving reverse payments from the originator to generics have violated competition law. The paper shows that this decision is the correct one. More broadly the paper analyzes problem areas of patent settlement assessment in Europe. It assesses what we can learn from the U.S. patent settlement debate with particular focus on the differences in regulatory frameworks of the pharmaceutical sector which are relevant for patent settlement assessment. The recommendation is presented that, instead of taking into account the wide range of factors and effects which are important for the correct assessment of these agreements, we should rather aim at a more pragmatic approach. The paper suggests that a presumption of the illegality of reverse payments in patent settlements and a safe harbor rule for agreements without reverse payments can be a feasible approach.