Reverse payment settlements i medicinalindustrien

Damun Mostofifard

Student thesis: Master thesis

Abstract

The purpose of this thesis is to outline and analyse the rather new reverse payment settlements in the pharmaceutical sector regarding to if this way of arranging patent settlements has as their object to prevent, restrict or distort competition and therefore, inherent with the EU competition law and more specifically Article 101 TFEU. Moreover, the thesis will analyse the impact of these arrangements on the incentives to innovate in the industry by using a modified industrial economic interaction paradigm to measure the dynamic performance. High numbers of blockbuster medicines reaching their molecule patent expiration dates and the lack of new products in the pipeline has created a market were generics are not easily let into the market. The originators are now enforcing their process patent on the generics more often. These interactions lead to the out of court settlements where the patent holder pays the generic to “respect” their process patents and stay out of the market. These kinds of settlements are now known as reverse payment settlements or as pay for delay agreements. The European Commission took the action of investigating the sector regarding this matter and finalized a sector report in 2009. In extension to this report the Commission opened cases against Lundbeck, Johnson & Johnson, and Servier all with the result of having their object to restrict competition. Whether these cases or in general reverse payment settlements truly are restricting the competition by their object is analysed more closely in this thesis. The economic analysis is based on a modified SCP-paradigm using evolutionary economics. The endogenous dynamic factors mechanisms, selection, variation, and transmission is affected by the exogenous reverse payment settlements. The results of these interaction leads to the dynamic performance, which can tell how the incentives to innovate are affected by these new kind of patent settlements and further more how the variation is affected if the Commission sticks to its object approach. In this thesis it is concluded that the dynamic performance varies depending on what the results would have been if the parties had litigated. To this different presumption was taken. The main finding is that in some cases where the Commission takes a object approach will have a negative impact on the incentive to innovate and therefore, harming the dynamic efficiency in the long run. The final discipline of this thesis was conducted through a legal policy analysis, which seeks to reflect on the knowledge obtained in the legal and economic analysis. The question that sought to be answered is whether an alternative legal approach would be more beneficial when considering the results from the economic analysis. The answer to this is that an effect approach to the settlements whom by their first glans cannot be set to restrict competition by object would be more dynamic efficient when is comes to the incentive to innovate. Other changes that could have a positive affect would be changes in the patent system and changing the length of process patents so that they cannot be used strategically to restrict future competition.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2015
Number of pages89