Posts Tagged: "reverse payments"

First, the Actavis decision is not limited to cash. The case itself involved not cash payments, but brand overpayments for generic services. In addition, the Supreme Court’s assertions on payments encompassed value from a generic’s reprieve from competition during its 180-day exclusivity period, as this period “can prove valuable, possibly ‘worth several hundred million dollars.’” Antitrust law makes clear that economic substance—not form—matters. And it does not make economic sense to apply Actavis to preclude antitrust scrutiny where, instead of overpaying for services, the brand pays the generic with real estate, gives the generic a lucrative business deal for free, or agrees not to launch its own generic version (known as an “authorized generic”).

The FTC brief explains that the no-authorized-generic (no-AG) commitment at issue raises the same antitrust concern that the Supreme Court identified in Actavis. A no-authorized-generic commitment means that the brand-name drug firm, as part of a patent settlement, agrees that it will not launch its own authorized-generic alternative when the first generic company begins to compete. An FTC empirical study of the competitive effects of authorized generics found that when a brand company does not launch an authorized generic during the exclusivity period reserved for the first-filing generic under the Hatch-Waxman Act, it substantially increases the first generic company’s revenues, and consumers pay higher prices for the generic product.

The Federal Trade Commission has asked the U.S. District Court for the District of New Jersey to accept an amicus brief that addresses the application of the U.S. Supreme Court’s recent ruling in FTC v. Actavis to a patent settlement containing a “no-authorized-generic” commitment. The FTC’s amicus brief states that the Effexor XR case presents “an issue with significant implications for American consumers”: whether pharmaceutical patent settlements are “immune from antitrust scrutiny so long as the brand-name drug manufacturer pays for delayed entry with something other than cash.” The brief explains why “[t]he allegations here raise the same type of antitrust concern that the Supreme Court identified in Actavis,” and thus should be treated in the same fashion.

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In this case, the Supreme Court considered an arrangement by which brand firm Solvay paid generics Watson (now Actavis) and Paddock roughly $30 to $40 million to delay entering the market with generic versions of testosterone gel. The Eleventh Circuit upheld the activity, concluding 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.” The court explained that “[p]atent holders have a ‘lawful right to exclude others from the market’” and that a patent “conveys the right to cripple competition.”

The Supreme Court reversed the Eleventh Circuit, concluding that, while a valid patent allows a patentee to charge “higher-than-competitive” prices, “an invalidated patent carries with it no such right.” The Court recognized the policy encouraging settlements. But for five reasons, it found that that policy did not dictate immunity for pay-for-delay settlements.

“Reverse payment” cases are an outgrowth of a key feature I noted in my first article on the basics of Paragraph IV Certifications: the filing of an Abbreviated New Drug Application (ANDA) by the generic drug maker with a Paragraph IV Certification is treated as a technical act of patent infringement.[2] After receiving notice of the Paragraph IV Certification, the patent owner/NDA holder has 45 days to bring suit, otherwise the FDA can move forward on approving the ANDA.[3] Conversely, if the patent owner/NDA holder does bring an infringement suit within the prescribed 45 day period, the FDA cannot approve that ANDA for 30 months, unless the patent(s) that are the subject of the Paragraph IV Certification are earlier deemed invalid or not infringed in that suit.[4]

Since my last article here on IPWatchdog.com, the pharmaceutical industry has been simply overflowing with interesting developments, including the US Supreme Court hearing arguments concerning three significant cases. The first case argued at the Supreme Court will determine whether generic drugmakers can be sued for alleged flaws in the design of their medications. Another argument before the Supreme Court was about pay-to-delay deals in which a brand-name drugmaker agrees to pay a settlement to a generic rival in exchange for ending patent litigation and launching a copycat medicine at a future date. The Court also heard arguments about a case that raises crucial questions about whether human genes can be patented. And the outcome may well reset the boundaries and direction of medical research in the US, which of course has tremendous implications for investments made by the biopharmaceutical industry and the battle against many diseases, notably cancer.

In Fiscal Year (FY) 2012, the number of potentially anticompetitive patent dispute settlements between branded and generic drug companies increased significantly compared with FY 2011, jumping from 28 to 40, according to a new Federal Trade Commission staff report. The study also found that in nearly half of these settlements, branded firms may have used the promise that they would not develop or market an authorized generic (AG) as a payment to stall generic drug firms from marketing a competing product.