Settlements between brand and generic pharmaceutical companies: a reasonable antitrust analysis of reverse payments.

INTRODUCTION Imagine that CureCo, Inc., is the exclusive seller of a patented product that yields hundreds of millions of dollars per year in revenues. CopyCo International announces its intention to market the product and compete with CureCo. CureCo promptly sues CopyCo for patent infringement. A federal court holds that the patent is invalid, appearing to clear the way for CopyCo to enter the market; however, CureCo appeals the decision. Before the appeal is concluded, the parties enter into a settlement agreement in which CureCo, the plaintiff, pays CopyCo, the defendant, twenty-one million dollars to refrain from marketing the product until the expiration of the invalid patent, preserving CureCo's exclusive hold on the market. Now imagine that the product is a life-saving chemotherapy drug. Over the vehement objections of consumers, public interest groups, and antitrust enforcers, the settlement is deemed legal by a federal district court, whose decision is affirmed by the court of appeals. These are the facts of a recent case' that took place amid growing criticism of the pharmaceutical industry. 2 Rising drug costs, 3 doubts about drug safety, 4 aggressive advertising to consumers, 5 and questionable * J.D. Candidate, 2008, Fordham University School of Law. I would like to thank my family for their unconditional love and tireless support through many, many years of school. which predominantly made changes and corrections to the citations in the original opinion, but did not modify the court's analysis or holding. marketing practices to physicians 6 have precipitated a lack of consumer confidence in pharmaceutical companies. 7 In an effort to lower health care costs, consumer advocacy groups are increasingly active in challenging the tactics that brand-name pharmaceutical companies use to prevent generic competition. 8 These efforts are complicated by the fact that the law for evaluating these tactics is unsettled. A potential conflict between antitrust law and patent law occurs when brand and generic pharmaceutical companies-potential competitors in the same market-enter into settlement agreements to resolve patent infringement suits. These settlement agreements fall into several categories, the most prevalent of which involves so-called "reverse payments" from the patent holder to the alleged infringer, typically in exchange for the alleged infringer's agreement to delay market entry of a pharmaceutical product or line of products. 9 Such arrangements between brand and generic pharmaceutical companies, particularly the unusual flow of compensation from plaintiff to defendant, may seem counterintuitive, but the arrangements arise, in …