An Aggregate Approach to Antitrust: Using New Data and Rulemaking to Preserve Drug Competition

Abstract:     
This Article examines the “aggregation deficit” in antitrust: the pervasive lack of information, essential to choosing an optimal antitrust rule, about the frequency and costliness of anticompetitive activity. By synthesizing available information, the present analysis helps close the information gap for an important, unresolved issue in U.S. antitrust policy: patent settlements between brand-name drug makers and their generic rivals. The analysis draws upon a new dataset of 143 such settlements.

Due to the factual complexity of individual brand-generic settlements, important trends and arrangements become apparent only when multiple cases are examined collectively. This aggregate approach provides valuable information that can be used to set enforcement priorities, select a substantive liability standard, and identify the proper decisionmaker. The analysis uncovers an evolution in the means - including a variety of complex side deals - by which a brand-name firm can pay a generic firm to delay entry. The Article proposes two solutions for such anticompetitive behavior, one doctrinal and one institutional: a presumption of (illegal) payment where a side deal is reached contemporaneously with delayed entry, and an expanded role for agencies, to gather and synthesize nonpublic information regarding settlements, and potentially to engage in substantive rulemaking. The aggregate approach also reveals the shortcomings of antitrust enforcement where, as here, firms can exploit regulatory complexity to disguise collusive activity.

Number of Pages in PDF File: 60

Keywords: agency, antitrust, drug, Chevron, Cipro, exclusion payment, FTC, Federal Trade Commission, generic drugs, Hatch-Waxman, paragraph IV, pay for delay, patent, pharmaceutical, regulation, reverse payment, rulemaking, Schering, settlement, Sherman Act, tamoxifen

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