Supreme Court rules against “pay-for-delay”

The U.S. Supreme Court today ruled that pay-for-delay agreements between brand name drug companies and generic manufacturers are subject to antitrust scrutiny.

In a vote of 5 to 3 (1 abstained), the Supreme Court reversed the lower court’s decision in the case of FTC vs Actavis, stating the FTC’s complaint should not have been dismissed by the U.S. Court of Appeals for the Eleventh Circuit. The FTC’s complaint involved the defendant paying millions of dollars to keep the generic manufacturers out of the market. “That form of settlement is unusual, and there is reason for concern that such settlements tend to have significant adverse effects on competition,” the decision stated.

In this case, Actavis and another manufacturer, Paddock, had filed applications for generic drugs that were modeled after Solvay Pharmaceutical’s AndroGel brand name product. Solvay sued the two generic companies for patent infringement. FDA granted Actavis’ product approval, yet Actavis reached a “reverse payment” agreement with Solvay, worth millions of dollars to not bring its product to market for a number of years. So did Paddock.

The FTC filed a lawsuit against Actavis, Paddock, and Par, which alleged that they violated the Federal Trade Commission Act by abandoning their patent challenges in exchange for sharing in Solvay’s monopoly profits. The District Court dismissed the FTC case and the Court of Appeals upheld the District Court’s decision.

“Going forward, parties to drug patent litigation are free to settle their cases, just as before. All that has changed is that one powerful but anticompetitive tool of settlement is not longer available to them,” according to C. Scott Hemphil, professor of law, Columbia Law School. “To be fair, a lot of drug makers recognized that already, even without a Supreme Court ruling. This decision formalizes that intuition as the law of the land.”

David Balto, an antitrust attorney and the former policy director of the FTC, said, “No other decision this term will have as much impact on consumer’s pocketbooks. It clearly maps out how the FTC can use the law to stop these anticompetitive schemes and make sure consumers receive the full benefits of a competitive marketplace. At the same time it permits the broad range of settlements that pose few competitive concerns.”