In Defense of Pay for Delay
In reverse settlements, drug makers pay generic competitors to postpone bringing copies of name-brand medicines onto the market…. To be sure, not all reverse settlements are in the consumer interest….
But there can be good reverse settlements too — ones that accelerate the market entry of generic drugs faster than litigation and before the patent expires. Under these circumstances, reverse settlements are pro-consumer.
Reverse settlements expand the options for rationally ending patent disputes. A brand-name company might settle to protect a high-risk investment even if it is convinced that its patent is strong, because anything can happen in litigation. Or the two sides might be at loggerheads. No one can know in advance which side will prevail at trial, and a cash payment might be the only way to reach an agreement.
Full article on the drug industry, the FTC and antitrust.
This is the first time I’ve seen this argument made. Interesting.
Another tactic that is sometimes uses is licensing a generic still under patent protection. To discourage generic firms from attacking a patent, the patent-holding firm will license the drug to a “friendly” generic drug maker — making potential profits lower for “unfriendly” generic drug makers that are threatening to file suit.
Even if justified, it is unseemly.
The WSJ handled this issue very well. Hatch-Waxman is a “work around” to partially compensate for the problem that the FDA has a government-granted monopoly over Rx regulation. If the FDA did not exist, then this issue would not exist.
Once patents expired, all generic competitors would be free to copy the branded medicine. The brand-name innovator could not pay them all off to keep out of the market! So, Hatch-Waxman incentivizes “first-mover” generic competitors to assert the invalidity of patents in order to partially compensate for the harm done by the FDA, and we observe a somwehat perverse outcome.
Indeed, I suspect that if the regulatory environment were more competitive, the level of product competition would be so much more intense than it is today, that most medicines would be “out innovated” by new patented drugs well before their patents expired.
Market Manipulation at its best. What happened to free markets?