32 State AGs Urge U.S. Supreme Court to Take on Patent Settlement Agreements

By Kurt R. Karst –      

Last Friday, 32 State Attorneys General filed an amicus brief with the U.S. Supreme Court asking the Court to grant the Petition for Writ of Certiorari filed last month by a group of drug purchasers in Louisiana Wholesale Drug Co., Inc., et al., v. Bayer AG, et al. (Case No. 10-762).  As we previously reported, the case centers around whether a patent settlement agreement (what opponents call “pay-for-delay” agreements or “reverse payments”) involving manufacturers of Ciprofloxacin HCl (CIPRO) is per se lawful under the Sherman Act. 

In September 2010, the U.S. Court of Appeals for the Second Circuit denied a Petition for Rehearing and Rehearing En Banc filed on behalf of certain drug purchasers in In Re Ciprofloxacin Hydrochloride Antitrust Litig., 604 F.3d 98 (2d Cir. 2010), that a panel of judges on the Court invited in their April 2010 decision affirming a 2005 decision by the U.S. District Court for the Eastern District of New York granting summary judgment for defendants (i.e., Ciprofloxacin HCl manufacturers).  The Second Circuit panel affirmed the district court decision because the Court believed its 2005 decision in In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187 (2d Cir. 2005), compelled it to do so.  According to the Court, “[s]ince Tamoxifen rejected antitrust challenges to reverse payments as a matter of law, we are bound to review the Cipro court’s rulings under the standard adopted in Tamoxifen.”  The drug purchasers, in their petition to the Supreme Court, say that the Court’s decision is necessary to resolve a 3-way circuit split over the proper standard for determining whether an exclusion payment violates the antitrust laws.

California Attorney General Kamala D. Harris, the lead on the amicus brief in support of the direct purchasers’ Petition, announced the submission of the brief late last Friday.  According to the State Attorneys General, “[a] surge in reverse payment agreements is threatening the existence of generic competition and the availability of affordable drugs to the states and their citizens.” 

Overturning [the] Tamoxifen and Cipro [decisions], and permitting broader antitrust scrutiny of reverse payments would reinforce Congressional intent underlying the Hatch-Waxman Act.  Doing so also would not undermine the courts’ general policy of promoting settlement. Without reverse payments, patent litigants can settle, as they did in the pre-Tamoxifen years, with licensed entry, in which the license terms are based on the strength of the patent rather than sharing of monopoly profits.  Reverse payments are not necessary to settle patent cases, and the payments “serve no obvious redeeming social purpose.”  State antitrust enforcers have a keen interest in ensuring that generic exclusion results from the strength of the patent rather than rivals’ common interest in eliminating competition and sharing the spoils at the consumers’ expense. [(Internal citation omitted)]

Joining California Attorney General Harris on the amicus brief are the Attorneys General from Arizona, Arkansas, Delaware, Florida, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Oklahoma, Ohio, Oregon, South Carolina, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, and Wyoming.

UPDATE:

• A second amicus brief submitted by several public interest groups (Consumer Federation of America, Prescription Access Litigation LLC, U.S. PIRG, and the National Legislative Association on Prescription Drug Prices) also urges the U.S. Supreme Court to grant the Petition for Writ of Certiorari.  "Few competition problems are as critical as pay-for-delay settlements such as the one involving Cipro," say the amici.  "Four arguments, slavishly followed by the courts, have introduced the gravest mistakes: (1) settlements are beneficial, (2) patents are presumed valid, (3) reverse payments fall within the scope of the patent, and (4) reverse-payment settlements are a natural by-product of the Act.  Strict adherence to these arguments flies in the face of the Hatch-Waxman Act and unnecessarily increases price and jeopardizes patients’ health."