On December 7, 2012, the Supreme Court agreed to review a ruling by the U.S. Court of Appeals for the Eleventh Circuit that "reverse-payment" agreements — whereby brand-name drug companies settle certain patent litigations brought against generic drug rivals — do not violate federal antitrust laws. FTC v. Watson Pharm., Inc., 677 F.3d 1298, cert. granted, __ U.S.L.W. __ (U.S. Dec. 7, 2012) (No. 12-416).
"Reverse-payment" settlements are often made to end patent litigations between brand-name and generic drug companies, which result from Abbreviated New Drug Applications (ANDAs) filed by generic drug companies seeking to market a generic version of a branded drug before the end of the patent term protecting the branded drug. The brand-name company and the generic company settle the litigation by a payment to the generic company, and an agreement whereby sales of the generic drug are delayed for some period of time. The FTC has filed numerous lawsuits alleging that such settlements are anticompetitive, with little success.
In this case, the FTC had challenged a patent litigation settlement agreement that included annual payments by Solvay Pharmaceuticals Inc. to delay generic drug manufacturers — Watson Pharmaceuticals Inc., Par Pharmaceuticals Inc., and Paddock Laboratories Inc.— from entering the market with generic versions of AndroGel, a topical testosterone replacement therapy. The Eleventh Circuit, in accord with several previous Eleventh, Second, and Federal Circuit decisions, rejected the FTC's arguments that such payments are unfair restraints on trade that violate federal antitrust laws. FTC v. Watson Pharm., Inc., 677 F.3d 1298, 1315 (11th Cir. 2012).
The U.S. Court of Appeals for the Third Circuit, however, recently held that such "reverse-payment" settlements are presumptively unlawful restraints on trade, creating a conflict among the circuit courts. In re K-Dur Antitrust Litig., 686 F.3d 197 (3d. Cir. 2012), petitions for cert. pending, No. 12-245 (filed Aug. 24, 2012) and No. 12-265 (filed Aug. 29, 2012). The Supreme Court now plans to consider the competing appellate court decisions and address the question presented by the FTC's petition for writ of certiorari:
Whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).
What This Means for You
The Supreme Court's decision may finally resolve the question of whether reverse payment settlements are per se unlawful, as the FTC has repeatedly argued. Alternatively, the Court may proffer an "appropriate" antitrust standard, providing guidance for lawful settlements of patent litigation between manufacturers of branded drugs and manufacturers of generic drugs. In either case, the decision may put an end to the string of litigations brought by the FTC challenging settlements of ANDA litigations between branded and generic drug companies.
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