2L Julian Zhu will present on his Comment Topic: Split-earth Settlements: Why Permissive Entry of Generic Drugs in Foreign Markets Should Give Rise to U.S. Antitrust Scrutiny

Pharmaceutical companies reap staggering profits on the backs of their name-brand drugs. These profits are enabled by patents, which empower the originators of these drugs to exclude potential competitors from the market and allow them to charge monopoly prices. However, patents expire, leading to the loss of market exclusivity and substantial revenue losses.    

To protect their profits, firms pursue all manner of strategies to delay generic entry. For a number of years, companies in both the U.S. and E.U. found that they could preserve their monopolies by simply paying generic competitors to stay out of the market. This sort of arrangement—typically reached through the vehicle of a patent dispute settlement—became known as a pay-for-delay, or reverse payment settlement.

Eventually, both U.S. and E.U. authorities determined that such settlements could violate antitrust law. But while naked cash payments and other easily valuable side deals disappeared from settlements, the condemnation of reverse payments did not spell the end of all generic-delaying agreements. In recent years, the makers of two of the world’s most lucrative drugs—Humira and Lantus—entered a slew of settlements with would-be competitors that delayed generic competition in the U.S. Curiously, however, these generics quickly entered European markets, leading to substantial price reductions. As of today, no federal court has yet ruled on whether this practice violates antitrust law. This Comment argues that courts should scrutinize these split-earth settlements as potential antitrust violations, either under existing antitrust frameworks or as indirect evidence of fatal patent weakness.