Lather, Rinse, Repeat: Senators Take Another Stab at Passing the Preserve Access to Affordable Generics Act

By Kurt R. Karst – 

Last week, Senators Amy Klobuchar (D-MN) and Charles Grassley (R-IA) announced the introduction of S. 2019, the Preserve Access to Affordable Generics Act.  The bill is the latest attempt to pass legislation to address pharmaceutical patent settlement agreements (aka “reverse payment agreements” or “pay-for-delay agreements”).  It’s also the first attempt (that we can recall) that Congress has made to pass the Preserve Access to Affordable Generics Act after the U.S. Supreme Court declined to hold, in FTC v. Actavis, Inc., 133 S. Ct. 2233 (2013), that reverse payment settlement agreements are presumptively unlawful, and that “Courts reviewing such agreements should proceed by applying the ‘rule of reason,’ rather than under a ‘quick look’ approach” (see our previous post here).  Since that June 2013 decision, the Federal Trade Commission (“FTC”) has continued to battle with companies in court over patent settlement agreements, sometimes with success (see here and here).  The Supreme Court’s decision has also opened the door on a lot of antitrust litigation (see here).  Despite this uptick in litigation, however, companies continue to enter into patent settlement agreements.  Last December, the FTC issued its most recent report on the topic (see our previous post here), saying that Fical Year 2013 saw 145 final patent settlement agreements filed with the Commission.  This was is a small increase from Fiscal Year 2012, but the 2013 numbers do not account for any potential fallout from the Supreme Court’s decision in Actavis.  “The FTC has kept the pressure on, but Congress should act to end these twisted litigation settlements,” commented Senator Grassley in a press release announcing the introduction of S. 2019.

Unlike the last version of the Preserve Access to Affordable Generics Act, which reminded us of that old saying about insanity (i.e., that insanity is doing the same thing over and over again and expecting different result) (see our previous post here), the latest iteration of the bill changes thing up . . .  but just a little. 

Like the previous versions of the Preserve Access to Affordable Generics Act, S. 2019 would amend the FTC Act to add a new section – Section 27 – to permit the FTC to “initiate a proceeding to enforce the provisions of [new Sec. 27] 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” if “an ANDA filer receives anything of value, including an exclusive license” – a new addition to the bill – and if “the ANDA filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the ANDA product for any period of time.”  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,” or, in a new exception, if the value received “is compensation solely for other goods or services that the ANDA filer has promised to provide.”  Previous versions of the bill concerned only ANDA applicants, but in the latest version of the bill, the term “ANDA” is defined to include an application under FDC Act § 505(j) and an application under FDC Act 505(b)(2).  (The bill does not address patent settlement agreements in the context of biosimilar applications submitted to FDA pursuant to PHS Act § 351(k).) 

Gone from S. 2019 are certain “competitive factors” found in previous versions of the bill that fact finders were to consider in determining whether or not the settling parties met the presumption burden noted above.  Instead, fact finders are subject to certain limitations, which also appeared in previous versions of the Preserve Access to Affordable Generics Act.  Specifically, the fact finder shall not presume: (1) “that entry would not have occurred until the expiration of the relevant patent or statutory exclusivity”; or (2) “that the agreement’s provision for entry of the ANDA product prior to the expiration of the relevant patent or statutory exclusivity means that the agreement is pro-competitive, although such evidence may be relevant to the fact finder’s determination under this section.”

Also gone from S. 2019 is the section appearing in previous versions of the bill that the FTC may issue regulations implementing and interpreting the new statutory provisions that would be added by the Preserve Access to Affordable Generics Act.  Of course, the FTC may nevertheless issue implementing regulations if S. 2019 becomes law. 

With the exception of a few additional items, the remainder of S. 2019 is identical to previous versions of the Preserve Access to Affordable Generics Act.  For example, “[e]ach person, partnership or corporation that violates or assists in the violation of [new Sec. 27] 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.”  Also, an agreement that violates propsed Sec. 27 would result in a forfeiture of an ANDA applicant’s 180-day exclusivity eligibility.  (This last penalty would not apply to 505(b)(2) applicants because they are not eligible for – or subject to – 180-day generic drug exclusivity.)

One notable change from previous iterations of the bill is a statute of limitations providing that the FTC “shall commence any enforcement proceeding . . . not later than 6 years after the date on which the partiesto the agreement file” the required notice with the FTC.  Previous versions of the bill gave the FTC only 3 years to initiate an enforcement proceeding.  Another notable change is the addition in S. 2019 of an “Effective Date” provision.  That new provision provides that proposed Section 27(a)(1) concerning enforcement proceedings “shall apply to all agreements . . . entered into after June 17, 2013,” while proposed Section 27(f) concerning penalties “shall apply to agreements entered into on or after the date of enactment of [the Preserve Access to Affordable Generics Act].” 

S. 2019 has been referred to the Senate Judiciary Committee.  The bill will either sit and die in committee, or be taken up as a stand-alone bill or as part of a broader package of legislative proposals.