Settlements of patent litigation between branded and generic drug makers that include a promise by the generic maker to stay out of the market, sometimes in exchange for a ‘reverse' payment, increase the profits of drug makers at the expense of consumers. Some commentators argue that drug...

A generic drug maker that has been sued for infringing a patent on a branded drug will sometimes promise, as part of an agreement settling the litigation, to delay selling its drug until as late as the expiration of the patent term. I adapt the standard optimal patent term model to determine...