US Supreme Court To Hear Arguments On Pay-For-Delay Drug Deals 23/03/2013 by Catherine Saez, Intellectual Property Watch Leave a Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window)The United States Supreme Court is scheduled to hear oral arguments on Monday in a case in which the US Federal Trade Commission is questioning payments made by brand name pharmaceutical companies to generic producers for delayed entry into the market of lower priced generics. In the case of Federal Trade Commission v. Actavis Inc, et al., the Supreme Court has to decide “whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud … or instead are presumptively anticompetitive and unlawful…,” according to the question presented to the Court. Oral arguments will be heard by the Court on 25 March. On 19 February, McDermott Will & Emery LLP organised a webinar on the case to present key issues on what they say “promises to have far-reaching impacts on settlements of pharmaceutical patent litigation”. The Federal Trade Commission v. Actavis case involves a type of patent litigation settlements known as “pay for delay” or “reverse payment” agreements in which a branded pharmaceutical manufacturer, which had sued a generic company for alleged patent infringement, settles and pays that generic company for delayed entry market. The Court of Appeal affirmed the dismissal of a complaint filed by the FTC. The case is about AndroGel a prescription gel used to treat hypogonadism, a medical condition in men which present low levels of testosterone. According to the FTC, “this case presents a question of great economic importance to consumers of pharmaceuticals.” The FTC said in its brief of petitioner [pdf] that the generic competitors’ agreements not to compete with Solvay (the branded drug owner) in exchange for payment from Solvay, were unfair methods of competition and that Solvay had unlawfully extended its monopoly on AndroGel, “not on the basis of its formulation patent, but by compensating its potential competitor.” “Reverse-payment agreements should be treated as presumptively unlawful because they closely resemble the sorts of horizontal agreements to suppress competition that have previously been condemned under the antitrust laws,” the brief said. One of the issues is the Drug Price Competition and Patent Term Restoration Act, commonly known as the Hatch-Waxman amendment, which amended the Federal Food, Drug, and Cosmetic Act in particular to “authorize abbreviated applications for the approval of a new drug,” to the Food and Drug Administration, according to the bill summary. According to William Gaede, intellectual property litigation partner at McDermott, the Hatch-Waxman Act created an “exemption from patent infringement for the development of drugs, but also more importantly it created a framework for generic and branded companies to litigate patent issues before a product was commercialized,” he said in the webinar. Generics companies seek to receive approval of their generic product first as this will grant them 180-day exclusivity when their drug comes to market preventing any other generic company to enter the market before that, he said. When a branded company and a generic company engage in litigation, “they will often try to settle the lawsuit in such a way that the 180-day exclusivity for the first filed will be preserved,” he said. Many of these cases are settled before trial for mutual benefits, according to Gaede. The branded company may lose its lawsuit against the generic company and thus may not be able to retain its exclusivity, and if the generic drug company loses the case, it is not able to recoup its investment on the product. Both sides usually settle for a later entry of the generic drug, but before the patent expiration, and for the branded company to pay the generic drug company for delayed market entry, he said, which is referred to as “reverse-payment.” According to Jeffrey Brennan, antitrust partner at McDermott and former head of the FTC’s Health Care Services and Products Division, also speaking the webinar, there are several types of settlement terms to reverse-payment. These include a supply agreement where the generic company is manufacturing the branded company’s pills and is paid for it, or that the generic company would promote the branded drug, or it could be that both companies enter in a joint venture where they will work together to create some new innovative drug product. According to the FTC, a reverse-payment “allows the brand-name manufacturer to co-opt its rival by sharing the monopoly profits that result from an artificially prolonged period of market exclusivity.” “Such agreements depart from usual settlement practices by giving the generic manufacturer a monetary payment that it could not have hoped to obtain from the brand-name manufacturer even by winning the lawsuit,” the FTC brief said. In the case at hand, Bennan said, the AndroGel patent expires in 2020. The two companies settled the suit in 2006 and the generic company is allowed to enter market in 2015. Actavis, which is the generic company, has an agreement to promote AndroGel to urologists, for a high share of the profits. Pharma Favours Ruling; Civil Society, Waxman Oppose In their amicus curiae briefs in the Federal Trade Commission v. Actavis Inc, et al case, both the brand owner, Solvay Pharmaceuticals Inc. [pdf], previously a subsidiary of Abbott Laboratories, and the generic company [pdf], Actavis (previously Watson Pharmaceuticals), want the ruling of the Court of Appeals for the Eleventh Circuit (10-12729) to be upheld. Meanwhile, civil society and some others, including large international generic manufacturers, are in favour of a reversal of the ruling. The largest Canadian-owned pharmaceutical company, Apotex, which said in their amicus curiae brief [pdf], that they have customers in the United States and 115 other countries, asks for the Court of Appeals ruling to be reversed. This stands in contrast to the amicus curiae brief [pdf] of the US National Association of Manufacturers (NAM), which wants the ruling to be affirmed. The NAM said that the “the impact of the FTC’s proposed rule on the economy is difficult to exaggerate.” The Court’s decision, they said in their amicus curiae brief, “will have a broad impact on innovators and patent holders in the manufacturing sector,” and would apply to “all intellectual property and all industrial sectors that are intellectual property-intensive.” They ask that the ruling of the Court of Appeals be affirmed. Public Citizen, a US-based non-governmental organisation, filed an amicus curiae brief [pdf] on behalf of Rep. Henry Waxman, the co-sponsor of the Hatch-Waxman Act. According to the brief, “Representative Waxman files this brief because he believes that judicial decisions shielding reverse payment agreements between brand-name and generic drug manufacturers from stringent antitrust scrutiny stand as a significant obstacle to the fulfillment of the important public policies embodied in the Hatch-Waxman Amendments and their 2003 revisions.” “Those pieces of legislation sought to speed the introduction of generic competitors to brand-name drugs, not to facilitate anticompetitive agreements among pharmaceutical companies to keep generics off the market,” the brief said. “Representative Waxman wishes to provide the Court with additional information about the policies underlying these important pieces of legislation to assist it in resolving this case.” The Public Patent Foundation (PUBPAT) said in their amicus curiae brief [pdf] that the decision of the Supreme Court will have a significant effect on the public interest. “Anticompetitive reverse-payment agreements between patent-holding brand name pharmaceutical companies and potential generic challengers eliminate congressionally intended and socially beneficial incentives for those potential generic challengers to compel judicial review of invalid patents,” they said. “Allowing the holders of bogus patents to bride would-be challengers to those patents to drop their challenge causes substantial public harm.” All amicus curiae briefs for the case can be found on Scotusblog. On 7 March, several US senators introduced a bill to amend the Federal Food, Drug and Cosmetic Act to ensure that valid generic drugs may enter the market. According to Patent Docs this bill aims at banning reverse payment settlement agreements. The bill was assigned to a congressional committee on 7 March, according to govtrack.us. It is expected to be considered and possibly sent to the House or Senate “as a whole.” Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related Catherine Saez may be reached at email@example.com."US Supreme Court To Hear Arguments On Pay-For-Delay Drug Deals" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.