<em>FTC v. Watson Pharmaceuticals</em>: Another Piece Of The Puzzling Marketplace For Health Care Innovation

Abstract

It is too soon to tell whether deciding the fate of national health reform last year in National Federation of Independent Business v. Sebelius has generally emboldened the U.S. Supreme Court to resolve legal uncertainties affecting the health care system. Nonetheless, 2012-2013 will be a busy year on this front for the Justices, who have already heard or agreed to hear seven relevant cases, including three involving the pharmaceutical industry. The first six cases are FTC v. Phoebe Putney Health System, Inc. (hospitals and the “state action” exemption from antitrust liability); Sebelius v. Auburn Regional Medical Center (Medicare reimbursement for hospitals); Association for Molecular Pathology v. Myriad Genetics, Inc. (patenting of human genes), on which we wrote earlier at Health Affairs Blog; Mutual Pharmaceutical Co. v. Bartlett (state tort liability for drug injury), Sebelius v. Cloer (the National Vaccine Injury Compensation Program), and U.S. Airways, Inc. v. McCutchen (ERISA and insurance companies’ rights to recover tort settlements). On December 7, the Supreme Court announced its decision to review the seventh and latest addition to the list, FTC v. Watson Pharmaceuticals. The Court will look to resolve a disagreement between federal appeals courts over the legality of so-called “pay for delay” or “reverse payment” settlements, in which a settlement payment flows from a patent holder to an accused infringer rather than, as might normally be expected, the other way around. Specifically, the Supreme Court will receive briefs and hear arguments regarding “[w]hether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).” In answering this question, the Court will influence a much larger debate over innovation in health care markets. Watson Pharmaceuticals’ piece of that puzzle will lie at the intersection of patent law, antitrust law, food and drug law, and civil procedure. We hope that the Court’s review and judgment will improve our collective capacity to apply these legal tools, but we also think it very unlikely that the Court will rule definitively on any of them.