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55 Food & Drug L.J. 321 (2000)
Pharmaceutical Patent Settlements: The Antitrust Risks

handle is hein.journals/foodlj55 and id is 347 raw text is: Pharmaceutical Patent Settlements: The Antitrust Risks DAVID A. BALTO * The [Hatch- Waxman Act] has been turned on its head. We were trying to en- courage more generics and through different business arrangements, the reverse has happened. , - Congressman Henry A. Waxman The central message of the Sherman Act is that a business entity must find new customers and higher profits through internal expansion-that is, by competing suc- cessfully rather than by arranging treaties with its competitors. 2 - Justice Potter Stewart I. INTRODUCTION This article addresses the topic of settlements between innovator and generic firms and when they may pose antitrust risks. These agreements have received considerable attention in the media because of their substantial impact on consumers.' It begins by describing the important role of antitrust enforcement in pharmaceutical markets and, in particular, reviews recent important enforcement actions taken by the Antitrust Divi- sion of the Department of Justice (DOJ) and the Federal Trade Commission (FTC). It then addresses the significance of competition in pharmaceutical markets and the im- portant role of the Hatch-Waxman Act.4 It continues by discussing why patent settle- ments as a general matter may raise competitive concerns. These concerns are often greater in the pharmaceutical context because the first generic to challenge a patent often has an exclusive right to market the drug for a 180-day period. The FTC recently brought a case in which the incumbent brand name drug manufacturer essentially paid a potential generic entrant, with generic exclusivity, to stay out of the market pending resolution of a patent infringement action. The case against Abbott Laboratories and Geneva Pharmaceuticals, Inc., was settled with a consent agreement.' The article closes with a discussion of the Food and Drug Administration's (FDA's) proposed rule on generic exclusivity and comments by the FTC staff on the proposal. * Mr. Balto is the Assistant Director of the Office of Policy and Evaluation, Bureau of Competition, FTC. This article represents the author's own views and not necessarily those of the FTC or any of its commissioners. ICongressman Henry A. Waxman, quoted in Sheryl Stolberg & Jeff Gerth, Keeping Down the Competi- tion; How Companies Stall Generics and Keep Themselves Healthy, N.Y. TIMES, July 23, 2000, at A-I. 2United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 116 (1975). ' Stolberg & Gerth, supra note 1; David Pilling & Richard Wolfe, Drug Abuses, Fnr. Teems, Apr. 20,2000; Dan Goldblatt, Generic Drug Firms Protect Their Turf, N.J. Bus. J., Apr. 18,2000 (quoting Hemant K. Shah, It's very clear that when [drug companies] are able to delay generic competition, the rewards can be enormous for both. If the prices don't drop the company can afford to give part of their profits to generic companies.). 4 Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (codified at 15 U.S.C. §§ 68b-68c, 70b (1994); 21 U.S.C. §§ 301 note, 355, 360cc; 28 U.S.C. §§ 2201 (1994); 35 U.S.C. §§ 156, 271, 282 (1994)). .5Abbott Lab., FTC File No. 981-0395 (consent agreement accepted for public comment, Mar. 16,2000); Geneva Pharms., Inc., FTC File No. 981-0395 (consent agreement accepted for public comment, Mar. 16, 2000). These types of agreements also have resulted in private litigation. See Biovail Corp. Int'l v. Hoechst Marion Roussel N. Am., Inc., 49 F. Supp. 2d 750 (D.N.J. 1999) (A reasonable trier of fact could conclude that an agreement between two competitors to delay the applicability of an exclusivity period for the purpose of keeping another competitor out of the market is an unreasonable restraint of trade or willful attempt to maintain a monopoly.). See continued

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