IP and competition: a waiting game
There has been a clear setback for the US Federal Trade Commission (FTC) in an area where the laws on IP and competition overlap.
In May this year, a judge dismissed the FTC’s claims that in return for a $112 million payment, Impax Laboratories had violated antitrust law by not marketing a generic version of Endo Pharmaceuticals’ pain-relief drug Opana ER (oxymorphone hydrochloride extended-release tablets) and abandoning a related patent challenge.
The case is a closely-watched example of the highly contentious issue of ‘pay-for-delay’, where branded drug companies locked in patent litigation with generic companies pay their rivals to keep them off the market. It was also the first reverse-payment trial since the US Supreme Court’s landmark 2013 decision in FTC v Actavis.
In that ruling, the court held that pay-for-delay settlements can violate antitrust law, in what was a “key historical marker”, according to Michael Carrier, a law professor at Rutgers University in Camden, New Jersey and an expert in antitrust and IP law.
Carrier says that in the five years since, US courts have been elaborating on what the Supreme Court meant and have mainly assessed whether payment to a generic should be limited to cash. Rulings have shown that payment does extend to other forms of conveyance, primarily, an authorised generic (AG), Carrier explains.
In the US, the first generic company to challenge a patent ultimately gets 180 days of market exclusivity, but the brand company itself is also entitled to launch its own AG in that period. According to Carrier, if a brand decides to launch an AG, the true generic can see its revenue cut substantially, “so if a brand promises not to introduce its own AG, that could be worth hundreds of millions of dollars and be very valuable to the generic”.
In finding that such a promise does count as payment, “it’s absolutely the right decision”, argues Carrier, because “if a brand is paying the generic $100 million in cash, that is the same as making a promise that it is worth $100 million”.
Carrier believes that the Supreme Court’s 2013 decision has helped to reduce the number of ‘pay-for-delay’ settlements in the US as it’s clear that courts will critically examine such agreements.
Fewer deals
In its latest report on branded drug firms’ patent settlements with generic rivals, dated November 2017, the FTC reported that the number of reverse-payment settlements entered into in fiscal year 2014 dropped from 21 to 14 in fiscal year 2015, marking a second annual decrease in such deals. The agreements involved 11 different branded pharmaceuticals with combined annual US revenues of approximately $4.6 billion, and in total, pharmaceutical companies filed with the FTC 170 agreements resolving patent disputes with generic manufacturers.
According to Shane Brunner, partner at US law firm Michael Best, it is difficult to assess the number of pending reverse-payment settlements because the terms of such deals are typically confidential. Therefore, he adds, the public generally learns of the settlements only when the FTC finds them to be anticompetitive and brings an enforcement action.
Brunner says the case to watch is the one against Impax, where the judge said the FTC had failed to prove that Impax would have entered the market sooner with a lower cost generic product had there been no settlement. He explains that fundamental to a pay-for-delay settlement’s being anticompetitive is the assumption that the cheaper generic would have reached the market sooner with no settlement rather than with the reverse-payment deal.
“That assumption is far from always true, however,” Brunner says. “Often, an alleged infringing generic manufacturer will conclude that its chances of prevailing in the litigation are low, and therefore it agrees to settle for a payment and stay off the market.
