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

60 Pages Posted: 11 Mar 2009 Last revised: 28 Dec 2013

C. Scott Hemphill

New York University School of Law

Date Written: 2009

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.

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

Suggested Citation

Hemphill, C. Scott, An Aggregate Approach to Antitrust: Using New Data and Rulemaking to Preserve Drug Competition (2009). Columbia Law Review, 2009; Columbia Law and Economics Working Paper No. 347. Available at SSRN: https://ssrn.com/abstract=1356530

C. Scott Hemphill (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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