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Actavis and Error Costs: A Reply to Critics
The Antitrust Source
  • Aaron S. Edlin, University of California - Berkeley
  • C. Scott Hemphill, NYU School of Law
  • Herbert J. Hovenkamp, University of Pennsylvania Carey Law School
  • Carl Shapiro, Haas School of Business, University of California, Berkeley
Document Type
Publication Date

The Supreme Court’s opinion in Federal Trade Commission v. Actavis, Inc. provided fundamental guidance about how courts should handle antitrust challenges to reverse payment patent settlements. In our previous article, Activating Actavis, we identified and operationalized the essential features of the Court’s analysis. Our analysis has been challenged by four economists, who argue that our approach might condemn procompetitive settlements.

As we explain in this reply, such settlements are feasible, however, only under special circumstances. Moreover, even where feasible, the parties would not actually choose such a settlement in equilibrium. These considerations, and others discussed in the reply, serve to confirm the wisdom of the Actavis inference, in which the observation of a large reverse payment serves as a “surrogate” for patent-case weakness and therefore for lost competition.

  • antitrust,
  • drugs,
  • FTC,
  • Hatch-Waxman,
  • innovation,
  • patent,
  • Paragraph IV,
  • pay for delay,
  • pharmaceuticals,
  • regulation,
  • reverse payment,
  • settlement
Publication Citation

The Antitrust Source, October 2014

Citation Information
Aaron S. Edlin, C. Scott Hemphill, Herbert J. Hovenkamp and Carl Shapiro. "Actavis and Error Costs: A Reply to Critics" The Antitrust Source (2014)
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