Abstract: Drug manufacturers often spend millions on research and development for drugs that never make it to market. As a result, manufacturers need to recoup these R&D costs in th
e sale of drugs that do make it to market. They often rely on the patent system, and the exclusivity it provides, to accomplish that recoupment. Drug manufacturers have turned to reverse payment settlements to extend that exclusivity and generate higher profits from a particular drug. Reverse payment settlements arise in the context of generic drugs. A patentee will offer to pay a generic manufacturer, an alleged infringer, to delay the release of the generic drug to the market. The payment is a purchase by the patentee to continue its exclusive right to sell its product; a right it already holds by virtue of the patent. For this reason, the practice is suspect of antitrust violations. In Federal Trade Commission v. Actavis, Inc., the Federal Trade Commission (FTC) filed a complaint alleging that reverse settlement payments were unfair restraints of trade and therefore violated federal antitrust laws. The Supreme Court held that reverse payment settlements in patent infringement litigation are not presumptively unlawful but can sometimes violate antitrust laws, to be determined on a case-by-case basis.The settlements are not immune from antitrust attack even if the agreement’s anticompetitive effects fell within the scope of the exclusionary potential of the patent.