On March 25, 2013, the U.S. Supreme Court heard oral argument in the Federal Trade Commission’s (“FTC’s”) case challenging the Hatch-Waxman patent settlements Solvay (now owned by Abbot Laboratories) entered into with Watson Pharmaceuticals, Par Pharmaceutical, and Paddock Laboratories resolving their disputes involving Solvay’s testosterone-replacement drug AndroGel®. The so-called reverse-payment settlements at issue in FTC v. Actavis, Inc., Sup. Ct. No. 12-416 (“AndroGel”) involved the generic manufacturers’ agreements to abandon their patent challenges and delay generic entry for nine years. The settlements also involved Solvay making certain payments to the generic manufacturers in return for backup manufacturing and marketing support. For additional background information, please see some of our more recent blogs here, here, and here.
The issue before the Court is whether reverse-payment settlements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the Eleventh and other circuits have held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit held in K-Dur).
Deputy U.S. Solicitor General Malcolm L. Stewart argued on behalf of the FTC that the Court should adopt a “quick look” rule of reason analysis under the antitrust laws whereby reverse-payment settlements will be presumptively anticompetitive unless defendants can show that the payment from the brand to the generic was for a purpose other than delaying generic entry, or the payment offered some pro-competitive benefit. Notably, this quick look approach was adopted by the Third Circuit in K-Dur. Counsel for the respondent drug companies argued that the Court should adopt the “scope of the patent defense” applied by the Second, Eleventh, and Federal Circuits finding these agreements to be lawful absent sham litigation or fraud in obtaining the patent.