ILNews

Bottling up generics

Back to TopCommentsE-mailPrintBookmark and Share
Indiana Lawyer Focus
The federal government recently asked the Supreme Court of the United States to put a stop to a pharmaceutical industry practice that’s become common enough to earn the shorthand legal description “pay to delay.”

The Federal Trade Commission sued over the practice whereby drugmakers agree to provide generic-drug manufacturers a “reverse payment settlement” to delay patent challenges that could allow less-expensive generics to be brought to market. The FTC claims “pay to delay” arrangements violate antitrust laws, and an FTC study says such deals cost consumers and taxpayers $3.5 billion annually in higher drug costs.

FTC v. Actavis Inc., 12-416, was argued March 25, and justices are presented with divergent rulings from two U.S. Circuit Courts of Appeal. The 11th Circuit affirmed a District Court ruling in Actavis that reverse payments were lawful so long as they did not restrain trade beyond the way that patents typically do. The 3rd Circuit, meanwhile, held in In re K-Dur Antitrust Litig., 686 F.3D 197 (2012), that such arrangements are presumed anticompetitive and unlawful.

It’s not just patent law at issue in Actavis. The 1984 Hatch-Waxman Act – officially the Drug Price Competition and Patent Term Restoration Act – encourages production of lower-cost generic drugs and gives generic makers incentives and avenues to bring patent challenges.

Indianapolis-based Eli Lilly and Co., the fifth-largest pharmaceutical manufacturer in the U.S., has not filed an amicus brief in Actavis, according to Director of Global Corporate Communications Mark E. Taylor. Lilly had no comment on the litigation, Taylor said.

But it’s clear from court filings that Lilly opposes the FTC’s position. Lilly Vice President and General Patent Counsel Douglas K. Norman is a signer of an amicus brief in Actavis

filed on behalf of the Intellectual Property Owners Association.

The brief says the Hatch-Waxman Act has fostered an environment in which generic makers file patent challenges regardless of their chances of success, sometimes doing so without putting their products on the market.

“Data collected by the Federal Trade Commission show that generic drug makers have raced one another to challenge innovators’ patents, and that they have compelling incentives to do so with little or no regard for the merits of those challenges,” the IPOA brief says.

“There is no basis in law or logic to require the settling parties in a Hatch-Waxman case to overcome a presumption of illegality in order to justify a reverse payment settlement. To create such a requirement would negate the well-established statutory presumption of a patent’s validity,” the brief says. “Instead, the court should hold that the objectives of the antitrust laws are met by asking whether the settlement unreasonably restrains trade outside the scope of the patent in question and allowing the parties to reach an arm’s-length bargain where no such impact is apparent.”

Faegre Baker Daniels LLP partner Aime Peele Carter also has joined an amicus brief in opposition to the FTC as a member of the board of the American Intellectual Property Lawyers Association. The group agrees that the justices should use a scope-of-patent test to determine whether pay-to-delay agreements should be allowed.

U.S. Deputy Solicitor General Malcolm L. Stewart argued on behalf of the FTC that such a test would restrict legitimate challenges. “There’s nothing in the Patent Act that says you can pay your competitor not to engage in conduct that you believe to be infringing,” Stewart told the justices.

California attorney Jeffrey I. Weinberger argued before the justices on behalf of Actavis and other drugmakers that the scope-of-patent test would rectify what he called a loophole in Hatch-Waxman.

“In any other industry a potential challenger has to make a major investment in a product, has to get it manufactured, has to put it on sale, and then litigate. And if they lose, they are going to be liable for enormous damages. That’s not the case under Hatch-Waxman,” Weinberger argued. “If they lose (a patent challenge), they haven’t lost anything. They just walk away.”

The American IP Lawyers Association, Carter said, “is taking the position that when you look at this in broad brushstrokes, Hatch-Waxman shifted the burden and the risk for generic manufacturers by allowing them to start to take steps to get to market sooner, and because of that, there’s been a growth of different ways to resolve those potential challenges to the patentee,” including reverse payment settlements.

“What this really gets to is the fundamental tension between federal antitrust laws and inventors who want to gain a patent to have a monopoly for a certain number of years,” Carter said. “I think anyone who’s involved in health care or pharmaceutical preparation at all is interested in this, whether it’s on the generic or the branded side.”

Don Knebel is a senior adviser to the Center for Intellectual Property Research at Indiana University Maurer School of Law in Bloomington and a veteran antitrust and IP attorney at Barnes & Thornburg LLP. He also is an adjunct professor at Maurer who teaches intellectual property antitrust.

For years, pharmaceutical companies largely assumed they were on firm legal footing in offering settlements to generic makers to fend off patent challenges, Knebel said. Pharmaceutical makers could retain a revenue stream from their patented drugs and generic producers could receive an agreeable, negotiated sum to drop their challenges for a specified time.

The 3rd Circuit ruling changed that, Knebel said. “Now, it is essentially up for grabs.”

“The FTC has been arguing for years, and on what I would consider a crusade, to stop these agreements,” Knebel said.

Knebel has represented clients on both sides of the issue, and both sides present compelling arguments. The court could determine that reverse payment settlements are always legal, never legal, or must be decided on a case-by-case basis, he said.

“Until this issue is resolved by the Supreme Court, I think branded pharmaceutical companies are going to be reluctant to enter into these agreements,” he added.

However the court decides, Knebel doesn’t believe the outcome will harm innovation. He said pharmaceutical companies will still have an incentive to produce new products to win patents, and generic makers will continue to be motivated to challenge those patents.•
ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. How nice, on the day of my car accident on the way to work at the Indiana Supreme Court. Unlike the others, I did not steal any money or do ANYTHING unethical whatsoever. I am suing the Indiana Supreme Court and appealed the failure of the district court in SDIN to protect me. I am suing the federal judge because she failed to protect me and her abandonment of jurisdiction leaves her open to lawsuits because she stripped herself of immunity. I am a candidate for Indiana Supreme Court justice, and they imposed just enough sanction so that I am made ineligible. I am asking the 7th Circuit to remove all of them and appoint me as the new Chief Justice of Indiana. That's what they get for dishonoring my sacrifice and and violating the ADA in about 50 different ways.

  2. Can anyone please help this mother and child? We can all discuss the mother's rights, child's rights when this court only considered the father's rights. It is actually scarey to think a man like this even being a father period with custody of this child. I don't believe any of his other children would have anything good to say about him being their father! How many people are afraid to say anything or try to help because they are afraid of Carl. He's a bully and that his how he gets his way. Please someone help this mother and child. There has to be someone that has the heart and the means to help this family.

  3. I enrolled America's 1st tax-free Health Savings Account (HSA) so you can trust me. I bet 1/3 of my clients were lawyers because they love tax-free deposits, growth and withdrawals or total tax freedom. Most of the time (always) these clients are uninformed about insurance law. Employer-based health insurance is simple if you read the policy. It says, Employers (lawyers) and employees who are working 30-hours-per-week are ELIGIBLE for insurance. Then I show the lawyer the TERMINATION clause which states: When you are no longer ELIGIBLE! Then I ask a closing question (sales term) to the lawyer which is, "If you have a stroke or cancer and become too sick to work can you keep your health insurance?" If the lawyer had dependent children they needed a "Dependent Conversion Privilege" in case their child got sick or hurt which the lawyers never had. Lawyers are pretty easy sales. Save premium, eliminate taxes and build wealth!

  4. Ok, so cheap laughs made about the Christian Right. hardiharhar ... All kidding aside, it is Mohammad's followers who you should be seeking divine protection from. Allahu Akbar But progressives are in denial about that, even as Europe crumbles.

  5. Father's rights? What about a mothers rights? A child's rights? Taking a child from the custody of the mother for political reasons! A miscarriage of justice! What about the welfare of the child? Has anyone considered parent alienation, the father can't erase the mother from the child's life. This child loves the mother and the home in Wisconsin, friends, school and family. It is apparent the father hates his ex-wife more than he loves his child! I hope there will be a Guardian Ad Litem, who will spend time with and get to know the child, BEFORE being brainwashed by the father. This is not just a child! A little person with rights and real needs, a stable home and a parent that cares enough to let this child at least finish the school year, where she is happy and comfortable! Where is the justice?

ADVERTISEMENT