Drug prices are currently a key area of discussion in many countries around the globe. Agreements that limit price competition in the pharmaceutical sector can have severe adverse effects on public health and national budgets. Given the current political debate in the United States on healthcare reform and the downward pressure on healthcare budgets in general, competition authorities are scrutinising any kind of agreement that would limit price competition (for example, by delaying entry of generic competition).

In its final report on the Pharmaceutical Sector Inquiry, delivered last July, the European Commission underlined its concerns regarding patent settlement agreements between originator and generic companies. According to the report, about half of the 207 assessed settlement agreements limited the generic companies’ ability to market their products.

Since then, the first competition cases against originator and generic firms have been opened[1]. In addition, it has been reported that the Commission is currently contemplating requesting copies of all the patent settlement agreements of pharmaceutical companies entered into between July 2008 and December 2009 in order to review their legality.

On the other side of the Atlantic, patent settlements have also come to the attention of the US antitrust authorities who have stated as their enforcement priority those agreements aimed at delaying the entry of generic drugs onto the market. The recent Solvay and Cephalon cases brought by the FTC before American courts confirm this trend. Political support for such enforcement is now emerging strongly, with draft legislation being introduced in the US Congress to establish a rebuttable presumption of illegality of patent settlements which include any value transfers to the generic company involved. This has limited exceptions, such as authorisation to market the product or sums to cover litigation expenses.

Since the European Commission has not yet provided clear criteria on how it will evaluate patent settlement agreements, the development of US legislation is no doubt of great interest in assessing the different options for antitrust enforcement.

Given this current trend on both sides of the Atlantic, any life sciences company potentially involved in patent settlement agreements should assess the legality of past agreements and the drafting future agreements with utmost care.