Reverse Payments Settlements and Upcoming Congressional Action
In light of the recent political focus on healthcare, several Congressional bills propose to single out a class of contracts between pharmaceutical companies for closer antitrust scrutiny. Oftentimes, a pharmaceutical company will engineer a functionally identical substitute to a “brand name” drug with specific appeal to consumers. This substitute – with the chemical properties of the known drug but a different name – is known as a “generic drug,” or simply a “generic.” In an attempt to preserve the legal monopoly a patented brand-name enjoys, the branded drug’s producer will sometimes offer the generic’s producer a payment to delay entry into the market for a fixed amount of time. Known as a “reverse payment settlement” – or colloquially as “pay for delay” – these agreements are at the intersection of contemporary fears and debates about healthcare and a debate as old as the law of competition itself.