Update on Antitrust and Pay-for-Delay: Evaluating “No Authorized Generic” and “Exclusive License” Provisions in Hatch-Waxman Settlements

In Federal Trade Commission v. Actavis, the United States Supreme Court held that a patent litigation settlement where a branded drug company pays a generic drug company to end the litigation and delay launching its generic may violate the antitrust laws. Although the decision ended years of controversy over whether such settlements were subject to antitrust scrutiny, many issues remain unresolved concerning the lawfulness of these settlements. In particular, courts have struggled in assessing the legality of patent settlements between branded and generic drug manufacturers involving non-cash compensation or benefits. This article discusses one type of non-cash compensation that is becoming more prevalent in such settlements: when a branded drug company grants the generic a license to launch early and agrees not to launch its own competing generic drug for a certain period of time.

While critics view such provisions as mere agreements not to compete, proponents have defended them as standard licensing practices that are procompetitive because they permit earlier generic entry. Some have even contended that such provisions are not even subject to Actavis and should be immune from antitrust liability. This article evaluates and largely rejects these arguments.