Brief Amici Curiae of 118 Law, Economics, and Business Professors and the American Antitrust Institute in Support of Petitioners

Abstract

This Supreme Court amicus brief, filed in Federal Trade Commission v. Watson, explains why exclusion-payment settlements, by which brand-name drug companies pay generic firms to delay entering the market, contravene the policies of patent law, antitrust law, and the Hatch-Waxman Act. It addresses five points.

First, the settlements are not consistent with the Hatch-Waxman Act, Congress’s framework for balancing patent and antitrust law in the pharmaceutical industry, which encouraged generics to challenge patents.

Second, the settlements are anticompetitive, serving as a form of market division, which is the practical result when brands pay generics to drop challenges to weak patents and delay entering the market instead.

Third, the mere fact of a patent cannot justify the payments. The Patent Office frequently issues invalid patents, and the patents at the heart of these settlements present concern, often covering not the drug’s active ingredient but narrower aspects like the formulation or method of use that are less innovative and bear more potential for anticompetitive mischief. Patent policy encourages challenges to weak patents, and the procedural presumption of validity does not justify the settlements.

Fourth, exclusion payments are not needed to settle cases in the public interest; history has shown that brands and generics can reach settlements without them.

Fifth, the most appropriate antitrust framework employs a “quick look” rule-of-reason analysis that treats exclusion payments as presumptively unlawful. Such a framework recognizes the potentially severe anticompetitive effects of exclusion-payment settlements while permitting the settling parties to introduce possible procompetitive justifications, if any, for their agreement.

Keywords: patent, antitrust, drugs, pharmaceuticals, settlement, Hatch Waxman, reverse payments, exclusion payments, Androgel

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