Excessive Reverse Payments in the Context of Hatch-Waxman

June 16, 2012

Reverse payments, such as the one at issue in Arkansas Carpenters Health & Welfare Fund v. Bayer AG, are controversial because they appear to be nothing more than agreements between competitors not to compete. However, because a patent was involved, the Federal Circuit refused to declare this agreement unlawful—even when the patentee offered to pay the alleged infringer large sums of money to exit the market. The recent introduction of The Preserve Access to Affordable Generics Act is an attempt by Congress to clarify its intent with respect to reverse payments under Hatch-Waxman. Although this legislation targets the right problem, it is too broad a solution because it would prohibit pro-competitive settlements in some circumstances. This Recent Development suggests modifying the Act so that such settlements would be prohibited only where the underlying patent is likely invalid or not infringed.