US court rules on reverse payment patent settlement
The US Court of Appeals for the Second Circuit ruled on April 29 that a so-called ‘reverse payment patent settlement’ between pharmaceutical company Bayer and three generic drugs companies did not violate US antitrust laws.
The court found that Bayer was entitled to pay generic companies Watson Pharmaceuticals, Barr Pharmaceuticals and Hoescht Marion Roussel to settle patent litigation that threatened to invalidate its patent for the active ingredient in the antibiotic ciprofloxacin hydrochloride (Cipro).
The settlements meant that no generic alternatives to Cipro could be marketed until six months prior to the patent’s expiration in 2003; Bayer agreed to pay the defendants in return for dropping their challenges to its exclusivity.
The plaintiffs in the current case are direct purchasers of Cipro, who allege that the reverse payment settlements amount to illegal collusion in violation of US antitrust laws. They further allege that the settlements artificially inflated the price of Cipro, because the lack of generic competition allowed Bayer to charge monopoly prices for the drug.
The court said that under the Tamifoxen precedent, it had to back the legality of the settlements, but took the unusual step of recommending that the plaintiffs ask for an en banc rehearing of the case. This would allow the court to review the Tamifoxen standard as a whole and potentially change it.
The two US antitrust regulators—the US Federal Trade Commission (FTC) and the US Department of Justice’s Antitrust Division—have both expressed their opposition to reverse payments, with the FTC a particularly vociferous opponent of them.
So while the court affirmed the US District Court for the Eastern District of New York’s decision in favour of the defendants in the case, it invited plaintiffs to request a further hearing before the full court.
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