Patent Settlement Agreements Remain in the Spotlight, But Not the Unified Spotlight the FTC Might Want

By Kurt R. Karst –  

Politico recently published an opinion piece authored by Federal Trade Commission (“FTC”) Chairman Jon Leibowitz, who is up for reappointment for a second term on the Commission, in which he stated he wanted to throw in his “two cents” on how Congress (and specifically the Joint Select Committee on Deficit Reduction – a.k.a. the “Super Committee”) can work to reduce the deficit “by billions of dollars, put billions more back in consumers’ pockets and cut health care costs for businesses that create new jobs – all without any new taxes or cuts in government programs.”  How?  Yes, you guessed it – by curbing patent settlement agreements (or what opponents refer to as “pay-for-delay” or “reverse payment” agreements).  The opinion piece came out shortly after the FTC the announced the release of its annual summary of agreements filed with the Commission during Fiscal Year 2011 saying that “pharmaceutical companies continued a recent anticompetitive trend of paying potential generic rivals to delay the introduction of lower-cost prescription drug alternatives for American consumers.”  (See our previous post here.)

The Congressional Budget Office (“CBO”) recently estimated that the enactment of the Preserve Access to Affordable Generics Act (S. 27) “would reduce unified budget deficits by approximately $1.4 billion over the 2012-2016 period and by nearly $4.8 billion over the 2012-2021 period.”  In January 2010, the CBO initially estimated that an essentially identical version of the Preserve Access to Affordable Generics Act considered by the last Congress (S. 369) “would reduce unified budget deficits by approximately $0.8 billion over the 2010-2014 period and by roughly $2.0 billion over the 2010-2019 period.”   That estimate was updated to reflect the passage of the Affordable Care Act.

Chairman Leibowitz’s Politico piece drew sharp criticism from another FTC Commissioner, J. Thomas Rosch.  In a response published by Politico, Commissioner Rosch stated that he does not think the Preserve Access to Affordable Generics Act should be tacked onto any piece of legislation, but rather, should stand or fall on its own merits.  Moreover, “[a]ny projected savings [from the legislation] are inherently speculative,” wrote Commissioner Rosch. 

Commissioner Rosch also took the opportunity to once again express his disagreement with the “clear and convincing” evidence standard in the Preserve Access to Affordable Generics Act.  The bill would, among other things, amend the 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.”  According to Commissioner Rosch, “[t]his heightened standard of proof has not been required in other types of settlements.  Indeed, the parties arguably should bear only the burden of producing some evidence justifying their settlement, and the commission arguably should always bear the burden of proving that the settlement is anticompetitive.”  His comments echo those he made during a speech earlier this year at the Sixth Annual In-House Counsel Forum on Pharmaceutical Antitrust, and that are shared by some Members of Congress (see our previous post here).