The reverse of a reverse payment?

From Reuters comes a summary of the settlement of the US patent infringement brought by Johnson & Johnson against Teva Pharmaceutical Industries Ltd in respect of Teva's US generic version of J&J's Ortho Tri-Cyclen Lo birth control pill. In short Teva, which briefly sold a generic version of the product earlier this month before ceasing shipments, has secured a licence to re-enter the market on 31 December 2015, or even earlier in certain circumstances (the patent is expected to expire in 2019). In return, Teva will pay J&J a royalty based on sales of its generic that it shipped.

Both companies put a positive spin on the settlement, the full details of which have not been made public. Said a spokesman for J&J:

"This settlement compensates us for loss caused by their at-risk launch and recognizes the patent is valid and enforceable".

Investors must have liked the result too, since both companies' shares rose on news of the deal, which looks a clever one. As the Reuters report notes:

"The settlement comes as US antitrust regulators and Congress are taking a closer look at patent settlements between brand and generic drugmakers amid allegations they shortchange consumers by delaying the arrival of low-cost generic drugs while the companies profit.

Many settlements that have drawn objections involved a payment from brand companies to generic firms -- what critics call "pay-for-delay" deals. But Natixis Bleichroeder analyst Corey Davis noted the Teva-J&J settlement involved the opposite -- a payment from Teva back to J&J".

"By not having any payments from the innovator, the (Federal Trade Commission) can have little basis to complain," Davis said in a research note".

The deal is said by Teva to remain contingent on the US District Court for the District of New Jersey, which is seised of the patent litigation suit, upholding the validity and enforceability of J&J's patent.