Reverse Payment: A Comparative Study

Abstract

This Article compares reverse payment settlements, also known as pay-fordelay deals, in the United States and Europe. These deals occur where a branded drug manufacturer sues, settles with, and pays a generic manufacturer to delay the entry of its generic. Unlike the United States, which has a decentralized drug purchasing system, European healthcare systems such as those in France and the United Kingdom wield monopsony buying power over drugs. We investigate whether regulator and monopsony power can neutralize these anticompetitive agreements. We conclude that while the incentives to agree to a reverse settlement are more limited in Europe, they do not disappear. Regulators should do more to encourage the entry of generics by: (1) making patents protected by anticompetitive reserve settlement unenforceable and (2) linking generic entry to a clear statutory entry system instead of an opaque patent system.