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Antitrust treatment of acceleration provisions in Hatch-Waxman settlements

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“Acceleration clauses” are a common element of Hatch Waxman patent settlements where multiple generic drug manufacturers seek market entry. These clauses allow entry by a settling generic firm before the agreed-upon entry date under certain circumstances. According to FTC data, these clauses appeared in at least 187 of 232 settlements in fiscal year 2016. In the wake of the U.S. Supreme Court’s opinion in Federal Trade Commission v. Actavis, Inc., putative class action plaintiffs have expanded the theories behind pay-for-delay claims to allege that acceleration clauses should be considered anticompetitive reverse payments from brands to generic firms. This article by Michael Keeley and Cristina Fernandez discusses (1) the content of post-Actavis legal precedents addressing whether acceleration clauses may constitute anticompetitive reverse payments; (2) the business rationales and economic incentives relating to acceleration clauses; and (3) recommendations regarding how to structure acceleration provisions in future Hatch Waxman settlements to avoid running afoul of Actavis and its progeny.