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A Real-World Analysis of Pharmaceutical Settlements: The Missing Dimension of Product-Hopping

Michael A. Carrier

Rutgers Law School

April 11, 2010

Florida Law Review, Vol. 62, 2010

The pharmaceutical industry plays an important role in improving human health. But it also provides the setting for some of the most concerning issues in the patent-antitrust intersection today. Two activities are particularly worrisome.

First, brand-name pharmaceutical firms and generic companies have settled patent litigation. As part of these agreements, brand firms have paid generics to drop their patent challenges and delay entering the market.

Second, brand firms, frequently at the end of a patent term, have engaged in “product hopping,” often switching from one means of administering a drug (e.g., tablet) to another (e.g., capsule).

In the past decade, courts and commentators have separately explored these activities. But no one has yet explored the intersection of these two forms of conduct. This Article tackles this project. In doing so, it uncovers a vital strategy that has, until now, fallen through the cracks of antitrust law.

This Article will show that the combination of settlements and product hopping results in unrecognized anticompetitive harm. Such a conclusion is particularly important given arguments offered by settling parties today, which on the surface appear reasonable. These parties have contended that settlement that allows entry before the end of the patent term is, by definition, procompetitive. After all, such entry would appear to introduce competition before patent expiration. This would seem to be a significant justification for the settlement.

But the closer analysis presented here reveals the anticompetitive effects arising from the combination of settlement and product hopping. For a settlement that prevents patent challenges for a period of time - even if less than the duration of the patent - gives the brand firm the space in which it can comfortably switch the market to the new product. So by the time, years later, when the generic enters, the market will have already been switched to the new product. The generic will no longer be able to take advantage of state drug product substitution laws that allow pharmacists to automatically substitute generic drugs in place of brand-name drugs. The lethal combination of the two, in short, erects a significant roadblock to pharmaceutical competition.

Number of Pages in PDF File: 28

Keywords: patent, antitrust, settlement, product hopping, drugs, pharmaceuticals, Hatch Waxman, reverse payments

JEL Classification: I18, K21, L40, L41, L43, L65, O34, O38

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Date posted: April 14, 2010 ; Last revised: December 28, 2013

Suggested Citation

Carrier, Michael A., A Real-World Analysis of Pharmaceutical Settlements: The Missing Dimension of Product-Hopping (April 11, 2010). Florida Law Review, Vol. 62, 2010. Available at SSRN: https://ssrn.com/abstract=1587818 or http://dx.doi.org/10.2139/ssrn.1587818

Contact Information

Michael A. Carrier (Contact Author)
Rutgers Law School ( email )
217 North Fifth Street
Camden, NJ 08102-1203
United States
856-225-6380 (Phone)
856-225-6516 (Fax)
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