Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC’s campaign against pharmaceutical reverse payments touted by Commissioner Brill, (Sep 17, 2013)

By Jeffrey May, J.D.

The FTC will continue its hard fought campaign against pharmaceutical “pay-for-delay” deals, also known as exclusion payment or reverse payment settlements, that raise anticompetitive concerns, Commissioner Julie Brill told attendees of the International Bar Association’s 17th annual competition law conference in Florence, Italy. In her September 14 keynote address, entitled “Antitrust and Innovation: Rebalancing the Scale,” Brill said that the FTC’s work “to rebalance the scale between innovation, patent policy, and competition will continue.”

In her speech, Brill described the statutory scheme of the Hatch-Waxman Act that underlies the pay-for-delay agreements. She noted that Hatch-Waxman has fostered generic competition and created incentives for branded drug innovation in the pharmaceutical marketplace. However, she contended that the Hatch-Waxman Act has been under significant threat in recent years from pay-for-delay.

Pay-for-delay refers to a practice whereby branded and generic drug companies agree to settle Hatch-Waxman litigation with a payment from the brand to its generic rival to ensure delayed generic entry. These pay-for-delay agreements are straightforward agreements not to compete, according to Brill.

A number of courts, however, began to show increasing judicial deference to defendants in pay-for-delay cases, and by 2005 the practice became practically per se legal, Brill explained. Courts increasingly placed greater weight on the patents than they did on competition. Still, the FTC persisted in its challenge to these agreements, despite the setbacks.

The ability of plaintiffs to challenge these agreement as antitrust violations was unclear at best until earlier this year when the U.S. Supreme Court issued its decision in FTC v. Actavis, Inc. (133 S. Ct. 2223, 2013-1 Trade Cases ¶78,419). In Actavis, the Court held that the legality of agreements not to compete between a patent holder and a would-be rival are to be assessed using “traditional antitrust factors.” Brill noted that these factors include: “likely anticompetitive effects, redeeming virtues, market power, and potentially offsetting legal considerations present in the circumstances, such as here those related to patents.”

Brill contended that going forward in the pay-for-delay area, the FTC will not only pursue matters currently in litigation to which the FTC is a party, but also continue investigating pay-for-delay deals and monitor private litigation involving pay-for-delay and where appropriate file amicus briefs.

Brill’s pledge reiterates a warning given by FTC Chairwoman Edith Ramirez in testimony before the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition, and Consumer Rights earlier this year. In July 23 testimony, Rameriz committed the agency to challenging pay-for-delay court settlements in the pharmaceutical industry.

Testifying before the same subcommittee in April, Ramirez said that the Commission was looking at other ways that drug companies might be delaying generic competition. Ramirez pointed to two strategies in addition to pay-for-delay agreements: (1) the potential abuse of safety protocols known as Risk Evaluation and Mitigation Strategies (REMS) to prevent a generic from being able to access samples of brand products to begin the bioequivalence testing process required by the Hatch-Waxman Act; and (2) product hopping, where brand companies, facing a threat of generic competition, make minor non-therapeutic changes to their products to prevent generic substitution.

Since that time, no new cases have been filed by the FTC in this area.

News: Antitrust FederalTradeCommissionNews