US Supreme Court rules drugmakers can be challenged on "pay-for-delay" deals

The US Supreme Court ruled 5-3 on Monday that drugmakers entering pay-for-delay deals surrounding generic medicines can be sued, reversing a lower court decision that had effectively insulated pharmaceutical companies from liability. "A reverse payment, where large and unjustified, can bring with it the risk of significant anticompetitive effects," noted Justice Stephen Breyer, adding that such accords should be evaluated under a longstanding antitrust test known as the "rule of reason."

However, Justice John Roberts, who voted against the ruling, said the decision "will discourage settlement of patent litigation," suggesting that "simply put, there would be no incentive to settle if, immediately after settling, the parties would have to litigate the same issue — the question of patent validity — as part of a defence against an antitrust suit." The Federal Trade Commission (FTC) had asked the court to rule that all reverse payment settlements were illegal, but Breyer said that was going too far, noting that the complexity of such deals "lead us to conclude that the FTC must prove its case." A federal appeals court had previously stated that pharmaceutical companies can’t be sued unless the patent litigation is a sham or a generic drugmaker agrees to delay introduction even after the patent has expired.

In the case before the court, the FTC alleged that Solvay’s pharmaceutical unit, which was acquired by AbbVie in 2010, entered into anticompetitive patent settlements in 2006 with Actavis' Watson Pharmaceuticals unit, as well as Paddock Laboratories and Par Pharmaceuticals. Specifically, the FTC claims that Solvay paid as much as $30 million annually to the three generic drugmakers to help preserve sales of the testosterone-replacement drug AndroGel through 2015. The drug generated more than $1 billion in sales last year.

In their argument against the charges, Solvay and the generic drugmakers noted that the 2015 entry date was still five years earlier than the expiration of the AndroGel patent, which they said guaranteed an early generic drug for patients. In addition, the companies stated that the payments were compensation for services to be provided by the generic drugmakers, including Watson’s marketing of AndroGel to urologists.

According to the FTC, there were 40 pay-for-delay accords reached in fiscal 2012 at an estimated cost of as much as $3.5 billion to consumers, a figure that the pharmaceutical industry contests. Commenting on the decision, FTC chairman Edith Ramirez said "the court has made it clear that pay-for-delay agreements between brand and generic drug companies are subject to antitrust scrutiny."

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