Joseph Saveri participated today in The Knowledge Group’s webinar roundtable regarding “Reverse Payment Settlements: Hot Topics in 2017.”
“Pay-for-delay” settlements, also known as “reverse payments,” are settlements in which a generic manufacturer threatens to enter the market for a particular drug. In order to settle the dispute, the generic manufacturer agrees not to challenge the patent and to enter at a later date; in return, the patent holder agrees to pay (in cash or other compensation) the generic manufacturer. Such settlements have been subjects of debate and litigation because they can be seen as the brand manufacturer paying a generic drug maker to stay off the market (and, thus, refrain from competing with the brand product) for a certain period of time.
In 2013, the U.S. Supreme Court ruled in Federal Trade Commission v. Actavis that such settlements may be challenged under antitrust laws on the ground that they may have an adverse effect on competition. Prior to the Supreme Court’s decision in FTC v. Actavis, there was a split in the circuits regarding the applicable standard, with the Second, Eleventh and D.C. Circuits applying a “scope of the patent” test and the Third Circuit applying a “quick look test.” In Actavis, the court rejected both of these approaches and found that a rule-of-reason test should be applied to determine if harm to consumers outweighs the benefits of the settlement.
According to an FTC study, pay-to-delay deals cost consumers and taxpayers $3.5 billion in higher drug prices every year. Thus, the FTC has been committed to blocking such settlements through enforcement actions and support of legislation to ban them. However, there is uncertainty whether that posture will continue in the Trump Administration, especially when the composition of the Supreme Court is also in play.
Other participants in the webcast included Thane D. Scott of Morgan Lewis & Bockius LLP, Lisa J. Cameron of The Brattle Group, Inc., and Stephanie Demperio of NERA Economic Consulting. They discussed the viability of reverse-payment settlements under Actavis and its interpretations in the courts and in the FTC. They analyzed how the legal landscape may change under the current administration.