Pharmaceutical Patent Litigation Settlements: Balancing Patent & Antitrust Policy through Institutional Choice

Abstract

Should a branded pharmaceutical company be allowed to pay a generic competitor to stay out of the market for a drug? Antitrust policy implies that such a deal should be prohibited, but the answer becomes less clear when the transaction is packaged as a patent-litigation settlement. Since Congress passed the Hatch-Waxman Act, which encourages generic manufacturers to challenge pharmaceutical patent validity, settlements of this kind have been on the rise. Congress, the Department of Justice, and the Federal Trade Commission have condemned these agreements as anticompetitive and costly to American consumers, but none of these bodies has been able to craft a regulatory solution. Several circuit courts have recently heard challenges to these settlements under existing antitrust law, but they have all adopted different approaches to balancing the drug patent holder\u27s right to settle litigation against the pro-competitive policies enshrined in the antitrust statutes. Drawing on the tools of comparative institutional analysis, this Note questions the wisdom of the single-branch regulatory reforms that have been proposed thus far and it advocates a return to common-sense administrative regulation for this technically complex legal problem. This Note calls for (1) Congress to begin the regulatory effort by articulating its policy goals, (2) the FTC to promulgate rules, including safe harbors, that further Congress\u27s policies, and (3) courts to use both Congress\u27s pronouncements and the FTC\u27s regulations as a basis for ultimately evaluating settlement agreements. By respecting institutional competencies, regulators can overcome the current political hurdles and bring clarity to this ambiguous nexus between patent and antitrust law