Paying for Delay or Something Else?--The Potential Anticompetitive Effect of Reverse Payment Patent Settlements in the Pharmaceutical Industry under article 101 TFEU

Abstract: This thesis discusses the recent hot topic in the intersection of IP law and competition law; “pay-for-delay” agreements in the pharmaceutical industry. Such agreements arise in patent disputes where originator manufacturers (‘Originators’) claim patent infringement by the generic manufactures (‘Generics’). However, patent infringing defendants end up paying the plaintiff large sums of money, accompanied with the generic’s agreement to delay or refrain from challenging the patent and launching generic drugs. Due to the fact that the parties may have agreed to not compete by sharing monopoly profits, pay-for-delay deals could lead to an artificially higher market price which detriments consumer welfare. Whether all suspicious pay-for-delay deals are anti-competitive has been controversial in the academic field and the courts in the US. As the EU has only recently started its study and investigations into the issue, it is worthwhile to study: whether such deals are anti-competitive in themselves, to what extent they could be anti-competitive under the EU competition law and how should they be examined to reach the optimum result for competition law implementation. Section 1 of this thesis will firstly give a general picture of the history of pay-for-delay deals in EU and US. Section 2 will further offer the legal context and the industry features that fertilize the emergence of pay-for-delay deals. Section 2.5 summarizes the change of attitude of US courts and the investigations in Europe. Through studies into the judgement/decisions of these cases, Section 3 proposes a system of classification for pay-for-delay, which puts pay-for-delay deals into high-risk, medium-risk and low-risk categories. The rationale and method of such classification will also be included. The thesis ends with the conclusion that not all the agreements that meet the superficial criteria of pay-for-delay agreements (restriction on generic entry and reverse value transfer) are of anti-competitive effect. Some may be the reasonable result of a genuine patent dispute and will not leave anti-competitive impacts on the market. It is thus necessary to classify these agreements by their level of anti-competitive risk and that they should be scrutinized differently in accordance with the classification they fall into.