Reverse payment settlements, in which a brand drug manufacturer makes a payment to a generic drug manufacturer in exchange for the generic manufacturer delaying entry into the market, are a frequent topic of scholarship. Common debates range from favoring either antitrust or patent laws to analyzing which settlements are most likely to be harmful to competition. The Supreme Court partially resolved these issues in FTC v. Actavis, Inc. when it held that lower courts analyzing reverse payment settlements should apply the “rule of reason” in weighing the anticompetitive concerns of the settlement against any procompetitive justifications. In doing so, the Court left to lower courts the task of structuring the particular rule of reason analyses.
This Note offers a solution for lower courts conducting the rule of reason analysis: consider a reverse payment settlement the functional equivalent of a merger and apply the techniques and case law associated with Section 7 merger cases. As will be explored below, lower courts have attempted many forms of analysis, many of which were rejected in Actavis. Because mergers frequently raise the same anticompetitive concerns as reverse payment settlements, the analyses take place in a common structure, which allows the imputation of merger case law to settlement analysis. Merger analysis is also sufficiently flexible such that only the truly anticompetitive settlements will be prevented. By providing a common framework for assessing reverse payment settlements, merger analysis allows for consistent holdings across the federal circuits—a consistency severely lacking in pre-Actavis case law.
This Note proceeds in four parts. Part II examines the history of reverse payment settlements and highlights the need for a consistent analysis structure. Part III compares the anticompetitive concerns of reverse payment settlements and mergers to argue that applying merger analysis is appropriate. Part IV surveys the available tools and relevant case law of merger analysis. Finally, Part V applies these tools to reverse payment settlements.