The Big Day Approaches: Supreme Court to Hear Oral Argument in ANDROGEL Drug Patent Settlement Agreement Case

By Kurt R. Karst –      

Excitement is running high in the pharmacetical world with just hours to go before the U.S. Supreme Court hears oral argument on Monday, March 25, 2013 in Federal Trade Commission v. Actavis (Docket No. 12-416) concerning whether drug patent settlement agreements (aka “reverse payment agreements” or “pay-for-delay agreements”) to resolve litigation brought pursuant to the Hatch-Waxman Amendments are generally per se lawful, or presumptively anticompetitive and unlawful under federal competition laws.  The Court finally agreed to hear a case concerning drug patent settlement agreements after years of refusing to do so.  Congress will also be closely watching the case, with two bills already pending that would severely dampen interest in in such agreements – S. 214, the Preserve Access to Affordable Generics Act (see our previous post here), and S. 504, the FAIR Generics Act (see our previous post on the same bill introduced in 2011) – and a March 22nd amendment (SA 628) to the continuing budget resolution that would discourage settlements.  Oral argument in Actavis comes less than a week after the Supreme Court heard Mutual Pharmaceutical Co. v. Bartlett (Docket No. 12-142) (see our previous post here), which is another case raising issues under the Hatch-Waxman Amendments and concerns generic drug labeling and whether federal law preempts state-law product liability claims against generic drug manufacturers.  (A copy of the oral argument transcript in Bartlett is available here.) 

The Supreme Court agreed to hear the case after the U.S. Court of Appeals for the Eleventh Circuit affirmed a decision by the U.S. District Court for the Northern District of Georgia largely dismissing multidistrict litigation brought by the FTC (and certain private plaintiffs) challenging certain drug patent settlement agreements in which Solvay Pharmaceuticals, Inc. allegedly paid some generic drug companies to delay generic competition to Solvay’s drug product ANDROGEL (testosterone gel).  The Eleventh Circuit, following the Court’s previous holdings in several cases, held that “absent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.” 

Respondents in the case argue in their briefs (here, here, and here) that the so-called “scope of the patent test” used by Eleventh Circuit correctly reflects patent and antitrust precedent.  That test is different from the so-called “quick look rule of reason” analysis advocated by the FTC.  As the U.S. Court of Appeals for the Third Circuit explained in In Re: K-DUR Antitrust Litigation (which is also on appeal to the Supreme Court – Docket Nos. 12-245 and 12-265) when it rejected the “scope of the patent test” and applied the “quick look” rule, under the “quick look” rule “the finder of fact must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit.” 

A few weeks ago we did a run-down of the amicus briefs submitted in support of the FTC (see here).  An even greater number of amici have come out in support of Respondents in the case:

• National Association of Manufacturers
• Generic Manufacturers Upsher-Smith Laboratories, Inc., et al. 
• Enavail, LLC 
• Generic Pharmaceutical Association
• Bayer AG and Bayer Corp.
• Shire PLC
• New York Intellectual Property Law Association
• Merck & Co., Inc.
• Pharmaceutical Research and Manufacturers of America
• Antitrust Economists
• Law Professors Gregory Dolin, Kent Bernard, et al.
• American Intellectual Property Law Association 
• Mediation and Negotiation Professionals
• David W. Opderbeck and Erik Lillquist
• Health and Economics Professors
• Washington Legal Foundation
• Intellectual Property Owners Association

Although the various amici address the case from different perspectives and have related, albeit different, interests, they all agree that Supreme Court precedent supports the scope of the patent test, and that the “quick look” rule would reduce patent challenges, decrease competition, and harm consumers.

The FTC, in its reply brief filed last week, got in the last word on the case, saying that the “quick look” rule best identifies and condems collusive behavior that eviscerates the brand-generic competitive relationship, and best respects the balance between innovation and competition Congress envisioned when it passed the Hatch-Waxman Amendments.  Conversely, says the FTC, the scope of the patent test would immunize and encourage collusive behavior.

There is already speculation circulating as to how the Supreme Court might rule in the case (see here).  The Court is expected to come to a decision in the coming months.  Until then, Supreme Court tea leave readers will scritinize every word uttered on March 25th for a clue as to the outcome.