Filing Details Economic Evidence Against Using a Presumption of Illegality for Reverse Payment Settlements of Pharmaceutical Patent Infringement Suits
Cornerstone Research staff and experts coauthored an antitrust economist amicus curiae brief submitted to the U.S. Supreme Court, anticipating the Federal Trade Commission v. Actavis Inc. et al. oral arguments scheduled for March 25, 2013. The brief asked the justices not to rule that reverse payment settlements (in which the patent holder makes a payment to the alleged infringer) are presumptively illegal, warning that such a ruling would reduce the value of pharmaceutical patents, thereby lowering incentives for innovation.
The authors argued that there is no evidence reverse payments have undermined the Hatch-Waxman Act’s goal of encouraging generic competition, noting that use of generics has reached an all-time high. The brief further explained that such settlements are often pro-competitive, noting that:
Real-world complexities such as asymmetric information, differing beliefs regarding the likelihood of prevailing in litigation, differing discount rates, and risk aversion could all lead the parties to negotiate patent settlements that involve reverse payments. Many of the above complexities result in situations where the parties would be unable to reach a settlement agreement without a reverse payment.
Rahul Guha and Sally Woodhouse of Cornerstone Research cosigned the brief, along with Stanford Law School Professor Daniel P. Kessler, Cornell University Professor Sean Nicholson, Duke University Professor Henry G. Grabowski, Boston University Professor Iain Cockburn, and University of Georgia Professor W. David Bradford, among other signatories. Attorneys from Patterson Belknap Webb & Tyler and Ballard Spahr submitted the filing.
In total, seventeen amicus briefs by drug companies, industry associations, and academics supported the respondents, Solvay Pharmaceuticals Inc., Actavis Inc., Paddock Laboratories Inc., and Par Pharmaceutical Cos.