Schering the market:: Analyzing the debate over reverse-payment settlements in the wake of the Medicare Modernization Act of 2003 and In re Tamoxifen Citrate Litigation

The Hatch-Waxman Act, a piece of legislation that seeks to foster generic competition for brand-name pharmaceuticals, has led to the troubling practice of reverse-payment settlements. In such settlements, the brand-name company pays the generic company a sum of money to delay the generic's entry into the market. Thus, the settlements raise antitrust concerns, but they also are complicated by the patent regime at play. This Note considers some of the prevailing antitrust theories used to analyze such settlements and looks at the three circuit courts that have addressed these payments. It concludes that no circuit split currently exists and that the Medicare Modernization Act of 2003, which amended Hatch-Waxman, has curbed the potential for antitrust violations. Further, this Note combines theories from the case law and scholarship and proposes a test for antitrust liability whereby the burden in the antitrust suit is assigned based on the size of the exit payment. Finally, this Note applies the proposed test to settlements filed with the FTC in the 2006 fiscal year.