The wake of FTC v. Actavis: practical implications on the pharmaceutical industry.

Abstract

2014 In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch–Waxman Act, attempts to balance a public interest in having generic pharmaceutical products while maintaining incentives for innovator companies [1]. Under the Act, a generic drug manufacturer may challenge a patented drug by filing an Abbreviated New Drug Application (‘ANDA’) for a proposed generic product, together with an appropriate certification. The most common of the latter certifies that the proposed ANDA product does not infringe the patent or patents covering the drug as listed in the US FDA’s Orange Book, and/or that the patents are invalid or unenforceable. In response, the innovator often initiates patent litigation to protect its market exclusivity. Although many ANDA patent cases proceed to trial, others are settled, as is common with other types of patent litigation. However, while typical patent litigation settlements involve a payment from the accused infringer to the patent owner, it is common for ANDA settlements to involve a ‘reverse’ payment from the brand manufacturer to the generic in exchange for an agreement by the generic to delay its entry into the market. In FTC v. Actavis [2], the Supreme Court considered whether reverse payment settlements can constitute a violation of antitrust laws [3]. (According to the Court, a reverse payment settlement occurs when: “Company A sues Company B for patent infringement.” The two companies settle under terms that require: Company B, the claimed infringer, not to produce the patented product until the patent’s term expires, and Company A, the patentee, to pay B many millions of dollars.) Prior to the decision, there was a circuit split on the issue. Some circuits viewed the practice as acceptable as long as the effect of the settlement fell within the scope of the patent [4]. The Third Circuit, in contrast, viewed such settlements as presumptively unlawful [5]. Ultimately, the Supreme Court took the middle ground in Actavis, ruling that reverse payment settlements can violate antitrust laws, but that each case must be considered individually under the so-called rule-of-reason standard, commonly used in antitrust cases. The Court left the structuring of the ruleof-reason test to the lower courts, which has led to uncertainty in this area of the law.