Activating Actavis: Economic Issues in Applying the Rule of Reason to Reverse Payment Settlements

19 Pages Posted: 17 Sep 2013 Last revised: 2 Apr 2014

Sumanth Addanki

NERA Economic Consulting

Henry N. Butler

George Mason University - Antonin Scalia Law School, Faculty

Date Written: September 16, 2013

Abstract

Ever since the Eleventh Circuit first articulated its scope-of-the-patent test, the debate about reverse payment settlements has been strident and polarized. In effect, each side of that disagreement has urged that these settlements presumptively are either legal or illegal. In fact, however, there is no economic support for either extreme position. In choosing the middle ground by ruling that the settlements are properly analyzed under the rule of reason, the Supreme Court has rightly affirmed that whether or not a given settlement is anti-competitive, pro-competitive or competitively neutral is ultimately a fact-specific inquiry. Some of the factors that will inevitably need to be addressed in such analyses include monopoly power, the characteristics and strength of the patent(s) at issue, the extent of the reverse payment, if any, the likely effect of the agreement on output and prices, and other considerations that often enter into rule-of-reason inquiries. Although such analyses can be burdensome and time consuming in some cases, in other situations threshold questions about monopoly power and patent strength may well prove pivotal and thereby obviate the need for an extended, full-blown rule of reason case.

Keywords: ANDA, antitrust, Arkansas carpenters, competitive effects, drugs, Federal Trade Commission, FTC, generic entry, Hatch-Waxman Act, horizontal collusion, K-Dur, market power, Paragraph IV, pay for delay, pharmaceutical industry, quick look approach, settlement, Third Circuit

JEL Classification: D40, D42, G18, H10, I10, I18, K10, K23, L11, L12, L40, L41

Suggested Citation

Addanki, Sumanth and Butler, Henry N., Activating Actavis: Economic Issues in Applying the Rule of Reason to Reverse Payment Settlements (September 16, 2013). Minnesota Journal of Law, Science & Technology, Vol. 15, No. 1, pp. 77-94, 2014; George Mason Law & Economics Research Paper No. 13-49. Available at SSRN: https://ssrn.com/abstract=2326604

Sumanth Addanki

NERA Economic Consulting ( email )

United States

Henry N. Butler (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8644 (Phone)

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