FTC Releases Latest Staff Report on Drug Patent Settlement Agreements; Post-Actavis Trends Seem to Be Forming

By Kurt R. Karst –

Last week, the Federal Trade Commission (“FTC”) announced the issuance of the Bureau of Competition’s annual summary of agreements filed with the Commission during the last fiscal year (Fiscal Year 2014) – Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.  The FTC’s FY 2014 Staff Report is the first full fiscal year report issued since the U.S. Supreme Court’s June 17, 2013 decision in FTC v. Actavis, Inc., 133 S. Ct. 2233 (2013), which addressed the standards that courts should apply in drug patent settlement cases (also known as “pay-for-delay” or “reverse payment” cases) (see our previous post on the Actavis decision).  Actavis has rippled through the legal system, with lower courts continuing to grapple with the broad contours of that decision, according to a recent article, titled “Where We Stand On Pharmaceutical Patent Settlements,” by Wilson Sonsini Goodrich & Rosati PC attorneys Seth C. Silber, Jeff Bank, Brendan Coffman and Kellie Kemp.

When the FTC issued its FY 2013 Staff Report in December 2014, the Commission noted that “[b]ecause [the Actavis] decision came nearly three quarters of the way through FY 2013, there are not yet enough post-Actavis settlements to draw meaningful conclusions from the [FY 2013] data” (see our previous post here). But with a complete fiscal year of post-Actavis data under its belt, the Commission is making some observations.

According to the FTC Staff Report, FY 2014 saw 160 final patent settlement agreements filed with the Commission – a record number since the data were first collected for FY 2004 – but only 21 of the agreements (involving 20 different brand-name drug products) “potentially involve pay for delay because they contain both explicit compensation from a brand manufacturer to a generic manufacturer and a restriction on the generic manufacturer’s ability to market its product in competition with the branded product.” That’s a drop from the 29 agreements reported in FY 2013, and a “significant decrease” from the record 40 agreements reported in FY 2012.  In addition, 53 of the 160 agreements reportedly involved ANDA sponsors eligible for 180-day exclusivity, of which 11 are identified by the FTC as “potential pay-for-delay settlements.”  The number of potential pay-for-delay settlements is the lowest since FY 2007 when there were also 11 such agreements. 

The downward trends in potential pay-for-delay settlements and settlements involving ANDA first-filers become quite apparent when we at the FDA Law Blog add percentages to the numbers supplied by the FTC and (as we have done in the past) illustrate the numbers in a table.

In a blog post, the FTC is hesitant to say that the numbers show a “lasting trend,” but the Commission does make three observations: (1) more settlements than ever were completed without reverse payments (and almost half in FY 2014 involved cash payments to a generic drug manufacturer of $5 million or less); (2) more settlements than ever were completed without reverse payments; and (3) the use of so called “No-AG” (no authorized generic) commitments appears to be declining.

Given the apparent trending of patent settlement agreements, one must ask whether legislation that would “prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market” is still necessary. After a hiatus, the Preserve Access to Affordable Generics Act reappeared last September in the form of S. 2019 (see our previous post here).  There doesn’t appear to be much steam behind the bill, which has languished in the Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights since it was introduced.  It’s difficult to see how legislators can use the report to support the need for what is essentially a ban on patent settlement agreements involving compensation.  In fact, the silence from Capitol Hill since the FTC Staff Report was published on January 13th is deafening . . . . and is perhaps telling as to the fate that will ultimately befall such legislation.