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The U.S. Department of Justice on Monday took a skeptical view on the legality of pharmaceutical patent settlements that delay the introduction of generic drugs, the latest change in antitrust policy under the Obama administration.

The department's antitrust division said in a court filing that drug patent settlements should be presumed unlawful when branded drug makers pay their generic counterparts to abandon patent challenges that could lead to early market entry of competing generic medicines.

For a settlement to survive legal scrutiny, a drug maker needs to have good explanations for why the settlement doesn't impose an unreasonable restraint on competition, the Justice Department said.

The department expressed its views in a case in which drug purchasers, including CVS Caremark Corp. (CVS) and Rite Aid Corp. (RAD), challenged an agreement in which Bayer AG (BAYRY) paid Barr Pharmaceuticals Inc. (BRL) to delay producing a generic version of Cipro, an antibiotic drug.

A New York federal appeals court is considering the case and invited the Justice Department to express its views on whether so-called "pay for delay" settlements violate the antitrust laws.

The U.S. Federal Trade Commission, which shares antitrust authority with the Justice Department, has been an adamant opponent of the settlements, saying that brand companies have paid potential generic competitors handsomely to sit on the sidelines.

In a public split between the agencies, the Justice Department under the Bush administration did not embrace the FTC's viewpoint that the deals violated antitrust laws. The department's change in position under the Obama administration goes a long way toward resolving that split.

Christine Varney, who heads the department's Antitrust Division, said during her confirmation hearings in March that she supported the FTC's opposition to the drug settlements.

Defenders of the settlements say the deals are pro-competitive because they often allow generic drugs on the market before a branded drug maker's patent ends, while also removing the uncertainty of litigation.

It's not clear what effect the government's position will have in the Cipro case. The Justice Department, while expressing its legal views, declined to take a position the drug purchasers' challenge to the Cipro settlement.

The New York-based 2nd U.S. Circuit Court of Appeals, which is considering the dispute, had previously adopted a permissive approach to allowing the drug settlements.

The court's request for the Justice Department's viewpoint suggests that at least some judges on the court are rethinking that position.

The Justice Department said Monday that the 2nd Circuit's approach was incorrect.

Lawmakers in the House and Senate have proposed legislation to bar patent settlements that delay generic drugs. A House subcommittee approved the legislation last month, while a Senate committee is expected to take up the bill soon.

FTC Chairman Jon Leibowitz said in a speech last month that banning the settlements could save consumers $3.5 billion annually in health-care costs, an estimate disputed by drug makers.

The FTC has challenged some drug agreements in court but has had limited success.

Most recently, the agency sued a group of drug makers in February, alleging that Brussels-based Solvay Pharmaceuticals Inc. (SVYSY), the maker of the testosterone drug AndroGel, entered into an illegal agreement with generic drug companies Watson Pharmaceuticals Inc. (WPI) and Par Pharmaceutical Cos. (PRX) to delay the introduction of a generic competitor.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com