U.S. Supreme Court to Review Eleventh Circuit's AndroGel Decision Regarding Reverse Payment Patent Settlements
On December 7, 2012, the U.S. Supreme Court granted the Federal Trade Commission's ("FTC's") certiorari petition and will address the question of whether settlements of Hatch-Waxman pharmaceutical patent litigation that include so-called "reverse-payments" are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud or, instead, are presumptively anticompetitive and unlawful.
As previously reported here, the FTC has repeatedly attacked reverse payment agreements between branded and generic pharmaceutical companies, alleging that such settlements--which the FTC also refers to as "pay-for-delay"--are a violation of antitrust laws. There is currently a split in the circuits regarding the legality of these agreements. In the decision now being reviewed by the Supreme Court, FTC v. Watson Pharmaceuticals, Inc. (involving the brand-name drug AndroGel), the Eleventh Circuit held that such settlements are legal so long as they fall within the "scope of the patent" and there is not evidence of sham litigation or fraud in obtaining the patent. Other courts have arrived at similar conclusions, including the Second Circuit (In re Tamoxifen Citrate Antitrust Litigation) and the Federal Circuit (In re Ciprofloxacin Hydrochloride Antitrust Litigation). In contrast, the Third Circuit's recent In re K-Dur Antitrust Litigation decision held that these agreements create a rebuttable presumption that the settlement is anticompetitive. Both Merck and Upsher-Smith filed petitions to the Supreme Court to review the Third Circuit's K-Dur decision; however, the Court has not yet announced whether it will grant those requests.
In AndroGel, the FTC asks the Supreme Court to adopt the Third Circuit's approach. The FTC argues that the "scope-of-the-patent approach in general, and the decision of the [Eleventh Circuit] in particular, reflect a misapplication of federal competition law." Thus, the FTC advocates for the Third Circuit's "approach, [in which] the restraints embodied in reverse-payment agreements are presumed to be anticompetitive, and the antitrust defendants--who, after all, have settled litigation against each other by agreeing not to compete--bear the burden of advancing some countervailing procompetitive virtue." (Internal quotation omitted).