Settled: Patent characteristics and litigation outcomes in the pharmaceutical industry

Abstract

A pharmaceutical company that seeks to produce a generic version of a brand drug before patent expiration can trigger a Paragraph IV litigation. However, generic and brand companies may avoid litigation through settlement, which sometimes involves payment to the generic company to delay generic entry. This behavior would be problematic if the settlement option was used to protect patents with low social value. This study explores the relationship between Paragraph IV litigation characteristics and the probability of a Paragraph IV settlement. Examining Paragraph IV settlements from 2003 to 2020, we find that the number of patents being litigated and the years of remaining market exclusivity are the strongest predictors of settlement. Moreover, we find no statistically significant relationship between active ingredient patents and settlement. This information may be helpful to regulators intending to promote the goals of the Hatch-Waxman Act.