Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Pharmaceutical Company Supports Supreme Court Review of Decision in Its Favor, (Nov 16, 2012)

By Jeffrey May, J.D.

Solvay Pharmaceuticals, Inc. is seeking some clarity from the U.S. Supreme Court on the legality under the antitrust laws of reverse payment patent litigation settlements. Solvay Pharmaceuticals, a defendant in a long-running FTC action challenging its patent litigation settlements with generic manufacturers concerning testosterone-replacement drug AndroGel, supports an FTC petition for review of a decision of the U.S. Court of Appeals in Atlanta (677 F.3d 1298, 2012-1 Trade Cases ¶77,865) affirming dismissal of the suit. Solvay Pharmaceuticals filed its brief with the Supreme Court on November 13 (FTC v. Watson Pharmaceuticals, Inc., Dkt. 12-416).

The U.S. Solicitor General on October 4 petitioned the Supreme Court to review the Eleventh Circuit's decision, rejecting the FTC’s challenge to the so-called “reverse payment” or “pay-for-delay settlements” between Solvay Pharmaceuticals and would-be generic competitors Watson Pharmaceuticals and Paddock Pharmaceuticals. Specifically, the petition asked whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud, or instead are presumptively anticompetitive and unlawful.

The Eleventh Circuit had refused to accept the agency’s argument that the settlement was subject to challenge because it exceeded the potential exclusionary scope of the patent. Under Eleventh Circuit precedent, “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.” According to the FTC, the underlying patent had no exclusionary potential because the brand name drug company was “not likely to prevail” in the underlying infringement action against the generic drug companies. However, the appellate court did not want to decide what the likely outcome of settled patent infringement claims would have been.

Respondent Solvay Pharmaceuticals said in its Supreme Court brief that it respectfully acquiesces in the petition for writ of certiorari. The company states that, even though it believes the Eleventh Circuit decision is correct, the split among the federal circuits calls for Supreme Court resolution. A recent Third Circuit decision (677 F.3d 1298, 2012-2 Trade Cases ¶77,971) held that reverse payments settlements between patent holders and would-be generic competitors in the pharmaceutical industry should be reviewed under a “quick look” rule of reason analysis based on the economic realities of the reverse payment settlement.

In its brief, Solvay Pharmaceuticals restates the question presented as whether the settlement of a bona fide Hatch-Waxman patent litigation in which the accused generic infringer is licensed to come to market before the expiration of the brand-name company's patent and which does not exceed the exclusionary potential of the patent is not rendered presumptively illegal merely because it also includes a business deal that is alleged to provide additional value to the alleged infringer.

Solvay Pharmaceuticals also agrees with the FTC that the agency’s challenge to the Androgel settlement would be a better vehicle for Supreme Court review of the pay-for-delay issue than the Third Circuit decision, which involved a private action challenging a settlement of two patent infringement cases involving the sustained-release potassium chloride drug K-Dur 20, made by Schering-Plough (now Merck). Two petitions are pending before the Court seeking review of the Third Circuit’s judgment in K-Dur. Alternatively, Solvay requested that the Court grant ceriorari in both cases.

Jeffrey I. Weinberger (Munger, Tolles & Olson LLP) for petitioner.

News: Antitrust