In the reverse payment case Joblove v. Barr Labs (S.Ct. No. 06-830), the Supreme Court has now asked for the government’s views on the antitrust effects of settlement agreements between holders of drug patents and generic drug makers enjoying the 180-day market exclusivity after Food and Drug Administration approval. This case involves the same legal issue that was raised in FTC v. Schering-Plough Corp., No. 05-273 (Jun. 26, 2006; denying certiorari), as well as three other recent petitions.The issue is the appropriate antitrust standard applicable to an agreement between a brand pharmaceutical manufacturer (and patent holder) and a generic market entrant (and alleged patent infringer) whereby the patent holder shares a portion of its future profits with the alleged infringer in exchange for the latter’s agreement to not market its competitive product. The three Circuit Courts of Appeals that have addressed the issue have rendered inconsistent decisions.
These antitrust class actions involve the prescription drug tamoxifen citrate (tamoxifen), a drug for the treatment of breast cancer. Zeneca manufactures and markets tamoxifen under the brand-name Nolvadex®. Zeneca’s former parent, Imperial Chemical Industries PLC (ICI), held the patent for tamoxifen, U.S. Patent 4,536,516 (‘516 Patent). In 1987, Barr amended its ANDA for tamoxifen to include a Paragraph IV Certification, which prompted a patent infringement suit by ICI (Zeneca’s parent which was then the patent holder). In 1992, the ‘516 Patent was held invalid and unenforceable.
While an appeal from the judgment invalidating the patent was pending in the Federal Circuit, Zeneca and ICI, the patent holders, and Barr, the alleged infringer, agreed to settle the case. Zeneca and ICI agreed to: (1) pay Barr $21 million; (2) pay Barr’s supplier $35.9 million; and (3) supply Barr with Zeneca-manufactured tamoxifen for resale in the United States at a high royalty rate. In return, Barr agreed to: (1) abandon its successful challenge of the tamoxifen patent; (2) withdraw its Paragraph IV Certification to manufacture and market generic tamoxifen prior to the patent’s expiration; and, if possible, and (3) prevent competitive entry by future generic manufacturers.
Now, the plaintiffs allege that the Agreements unlawfully restrained competition in the market for tamoxifen in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and analogous state statutes. The question presented being “Under what circumstances is an agreement by a brand pharmaceutical manufacturer (and patent holder) to share a portion of its future profits with a generic market entrant (and alleged patent infringer), in exchange for the generic’s agreement not to market its product, a violation of the antitrust laws?”
In FTC v. Schering-Plough Corp., the Solicitor General concluded that no conflict exists that would warrant this Court’s review of this issue, based on the same body of case law that exists today. The court of appeals, after noting the public policy favoring settlement of litigation and the statutory right of patentees to exclude competition with in the scope of their patents, rejected that this violated the Sherman Act per se by settling, instead of litigating, a legitimate dispute between them over the validity of the patent for the drug tamoxifen. The court agreed that “‘simply because a brand-name pharmaceutical company holding a patent paid its generic competitor money cannot be the sole basis for a violation of antitrust law,’ unless the ‘exclusionary effects of the agreement’ exceed the ‘scope of the patent’s protection.'”
To add mud to the mix, the Preserve Access to Affordable Generics Act (S. 316) has been introduced into Congress to prohibit brand name drug companies from paying off generic drug companies to delay the entry of a generic drug into the market.
This would amend the Clayton Act (15 U.S.C. 12 et seq.) adding section 28, entitled “Unlawful Interference with Generic Marketing.” This section would read:
(a) It shall be unlawful under this Act for any person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim which (1) an ANDA filer receives anything of value; and (2) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time.
(b) Nothing in this section shall prohibit a resolution or settlement of patent infringement claim in which the value paid by the NDA holder to the ANDA filer as a part of the resolution or settlement of the patent infringement claim includes no more than the right to market the ANDA product prior to the expiration of the patent that is the basis for the patent infringement claim.
We’ll keep you posted on developments.
Reverse payments should not be per se illegal…at least if one makes a detailed analysis esp. in given that US law does not have compulsory licensing or comparative infringement. But who has written the most compelling cases on either side? Maybe for legality Schildkraut? Maybe against legality Cotter? Hemphil’s is just late and pilling on–how did that even get into NYU law review? (just trying to be provocative of those more knowledgeable than me to aid in my research of this topic)…thanks.
[…] (S.Ct. No. 06-830). Earlier, the Supreme Court had asked for the government’s views on the antitrust effects of settlement agreements between holders of drug patents and generic drug makers e…. This case involves the same legal issue that was raised in FTC v. Schering-Plough Corp., No. […]
[…] Barr Labs (S.Ct. No. 06-830). The Supreme Court had asked for the government’s views on the antitrust effects of settlement agreements between holders of drug patents and generic drug makers e…. This case involves the same legal issue that was raised in FTC v. Schering-Plough Corp., No. […]