The eyes of the pharmaceutical industry will be on the Supreme Court this term. In addition to determining the fate of gene patents, the justices recently agreed to take on pay-for-delay deals commonly used to slow the release of generic medications.
The agreements generally stem from patent infringement litigation brought by makers of brand name drugs against potential generic competitors, which contest the alleged infringement or the validity of the underlying patent. To resolve the lawsuits, the seller of the brand-name drug agrees to pay the generic drug maker a specified sum (often hundreds of millions of dollars) to refrain from selling the competing generic drugs for a specified number of years.
The Federal Trade Commission challenges the validity of these "reverse payment" or “pay-for-delay” agreements. It contends that they are presumptively anticompetitive and unlawful, costing consumers billions of dollars every year in higher prescription costs.
The specific question before the Supreme Court in Federal Trade Commission v. Watson Pharmaceuticals Inc. is whether reverse-payment agreements are per se lawful in all situations or only when the underlying patent litigation was a sham or the patent was obtained by fraud. The case involves an agreement by Solvay Pharmaceuticals Inc., now owned by Abbott Laboratories, which delayed the release of a generic equivalent of its testosterone medication AndroGel.
While federal courts have traditionally upheld the agreements, as the Eleventh Circuit Court of Appeals did in Watson Pharmaceuticals, the Third Circuit Court of Appeals recently struck down a reverse payment agreement in another case involving Merck & Co Inc. The circuit split is likely what prompted the Supreme Court to intervene.
This case has the potential to have a significant impact on the pharmaceutical industry, and we will be closely monitoring the Supreme Court’s decision. We encourage you to check back for updates.
If you have any questions about this case or would like to discuss the enforceability of patent litigation settlement agreements, please contact me, Michael Cifelli, or the Scarinci Hollenbeck attorney with whom you work.