Eariler this month, three pharmacy chains and a wholesaler--CVS, Rite-Aid, Arthur's Pharmacy, and Louisiana Wholesale--petitioned the Supreme Court to review the legality of pay-for-delay settlements. Specifically, the petitioners cited a Second Circuit decision, from April, where the Court upheld the legality of a pay-for-delay deal, where Bayer Pharmaceuticals paid Barr Pharmaceuticals to drop its challenge to a patent covering the blockbuster antibiotic Cipro®. Pay-for-delay deals occur when a generic drug manufacturer agrees not to market its drug before the expiration of the branded drug's patent in exchange for money--thereby delaying the introduction of generic rivals onto the market.
The petitioners challenged the Supreme Court to answer the question: "whether, absent patent fraud or sham litigation, a brand drug maker's substantial payment to a competing generic drug maker to forgo judicial testing of the patent and restrict entry is per se lawful under the Sherman Act." The petitioners argued that such settlements are "antithetical" to the purpose of the Hatch-Waxman Act, that they violate fundamental antitrust principles, and that this issue is of "enormous public importance" and, therefore, should be considered by the Supreme Court.
The Federal Trade Commission ("FTC") has argued against pay-for-delay settlements for years stating that these deals are anti-competitive, because they delay the entry of lower-cost medicine into the market. The Chairman of the FTC, John Leibowitz, speculated, in a recent speech, that banning pay-for-delay settlements would save consumers $35 billion dollars in 10 years. However, the FTC has unsuccessfully lobbied Congress to enact legislation to restrict the pay-for-delay settlements. And further, appellate courts have not been aligned with the FTC. With the exception of a 2003 Sixth Circuit decision, other appellate courts have rejected the FTC's argument that pay-for-delay settlements are per se illegal. See Schering-Plough Corp. v. Federal Trade Commission, In re Tamoxifen Citrate Antitrust Litigation.