The Obama administration’s Justice Department says that so-called pay-for-delay arrangements in which an innovator drug company pays a generic drug company to delay entry into the market are generally unlawful under antitrust laws.

The department provided its analysis in a brief filed at the request of the Second Circuit Court of Appeals in a case involving Bayer’s payments of $349 million to Barr Laboratories to delay entry of a generic form of its Cipro antibiotic.
The department’s brief says that the “anticompetitive potential of reverse payments in the Hatch-Waxman context in exchange for the alleged infringer’s agreement not to compete and to eschew any challenge to the patent is sufficiently clear that such agreements should be treated as presumptively unlawful….”

The department says that individual cases should be judged on a “rule of reason” and might not be unlawful if there is a reasonable explanation for the payment involved.

If, the brief says, the transaction involves a payment to get the generic company to drop a challenge to an innovator’s patent and to stay out of the market for a period of time, that would be presumptively unlawful.
But payments to generic companies might be legal if the amount is not higher than what the patent holder would have spent to defend a patent’s validity in court.