House Passes Patent Settlement Legislation as Part of the War Funding Bill

By Kurt R. Karst –   

Late Thursday, the U.S. House of Representatives passed a package of amendments (beginning on page 74) to the War Funding Bill (H.R. 4899) that included the “Preserve Access to Affordable Generics Act,” which is intended to curb patent settlement agreements (what opponents call “pay-for-delay” agreements).  The amendment appears to be identical to an amendment Senators Herb Kohl (D-WI), Charles Grassley (R-IA), and Susan Collins (R-ME) introduced during the Senate’s consideration of the Tax Extenders Act (H.R. 4213) (see our previous post here).

The bill, which will have to be passed by the Senate, would amend the Federal Trade Commission (“FTC”) Act to permit the FTC to “initiate a proceeding to enforce the provisions of [new Sec. 28] against the parties to any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product.”  Such agreements, if challenged, would be presumptively anticompetitive and unlawful unless it can be demonstrated “by clear and convincing evidence that the procompetitive benefits of the agreement outweigh the anticompetitive effects of the agreement.”  In addition, “[e]ach person, partnership or corporation that violates or assists in the violation of [new Sec. 28] shall forfeit and pay to the United States a civil penalty of not more than 3 times the gross revenue of the NDA holder from sales of the drug product that is the subject of the patent infringement claim for the period of the violation, starting with the date of the agreement.”

The amendment was included in H.R. 4899 over the objection of some legislator who urged in a June 30, 2010 letter to House Appropriations Committee Chairman David Obey (D-WI) that the provision be eliminated.  According to those legislators:

From a substantive standpoint, the legislative language will achieve exactly the opposite of its intent. The two primary provisions of the legislative language will, in concert, remove current incentives for generic drug companies to challenge drug patents. Consequently, generic drug companies will wait until new drug patents expire before they bring a generic product to market. Consumers will then wait, on average, 5 to 9 years for access to cheaper generic medicines and consumer benefit will arguably be diminished.

According to a Dow Jones report, the measure was strongly backed by both House Speaker Nancy Pelosi (D-CA) and House Energy and Commerce Committee Chairman Henry Waxman (D-CA).