Uncertainty and Reverse Payments
57 Pages Posted: 14 Apr 2016 Last revised: 26 Sep 2017
Date Written: February 1, 2016
The current approach to “reverse payment” settlements of drug patent litigation seeks to preclude only those settlements guaranteed to harm consumers, rather than all that could harm them. Antitrust tolerates the possibility of harm in order to give firms the freedom to make settlements that might benefit consumers, relative to what courts would achieve under patent law. Antitrust’s mission is not, however, to improve upon outcomes under patent law, but rather to prevent harm to consumers. Accordingly, antitrust must minimize the possibility of harm, even if that precludes the chance of gain. I show that a ban on all settlements that fix a date of entry, regardless of the existence of a reverse payment or the number of generic challengers, is the best way to do that.
Keywords: patent settlement, antitrust, monopolization, horizontal anticompetitive practices, drugs, pharmaceuticals, generic drug, litigation, settlement, consumer welfare, principle of insufficient reason
JEL Classification: L41, L65, O34, K41
Suggested Citation: Suggested Citation