Patent Punting: How FDA and Antitrust Courts Undermine the Hatch-Waxman Act to Avoid Dealing with Patents

Abstract

Under the Hatch-Waxman Act, patent law and FDA regulation work together to determine the timing of generic entry in the market for drugs. But FDA has sought to avoid any responsibility for reading patents, insisting that its role in administering the patent provisions of the Hatch-Waxman Act is purely ministerial. This gap in regulatory oversight has allowed innovators to use irrelevant patents to defer generic competition. Meanwhile, patent litigation has set the stage for anticompetitive settlements rather than adjudication of the patent issues in the courts. As these settlements have provoked antitrust litigation, antitrust courts have proven no more willing than FDA to address the merits of the underlying patent infringement actions, preferring to rely on misleading proxies such as the existence of a “reverse payment” in the settlement agreement. Antitrust litigation is, at best, a belated and awkward mechanism for correcting the effects of improperly delayed generic entry. But FDA is well-positioned to make timely determinations of which patents meet the statutory criteria for deferring generic entry. With proper staffing and resources, FDA could use its expertise in drug regulation to make rough assessments of the relationship between particular patents and the scope of FDA approval in NDAs and ANDAs quickly and cheaply, while leaving patent infringement remedies intact. Only those patents that FDA decides could reasonably be asserted against an unauthorized generic would lead FDA to stay approval of the generic pending litigation of the infringement action. The result would be a reduction in incentives to pursue dubious patent infringement claims, with a corresponding reduction in opportunities for anti-competitive settlements.

Keywords: Patent, antitrust, FDA, Hatch-Waxman, Orange Book

JEL Classification: K21