In FTC v. Watson Pharmaceuticals Inc. et al., the Eleventh Circuit Court of Appeals affirmed the dismissal of the FTC’s complaint alleging that Solvay Pharmaceuticals Inc. and manufacturers of generics versions of Androgel violated the antitrust laws by settling patent claims through an arrangement in which the branded drug company paid the generics to keep their version of the drug off the market.
The FTC has long argued that these sorts of settlements are anticompetitive. The branded and generic drug companies can both earn higher profits by agreeing not to compete. But consumers, who have no say in the settlement negotiations, pay higher prices for the drugs than they would if the generics had been introduced.
In a series of cases, the appellate courts have held that a drug patent is presumed valid and that no antitrust liability can arise as long as the settlement remains within the legitimate scope of the patent. In this case, the FTC argued that where the patent is likely to be held invalid, the settlement exceeds the patent’s legitimate scope. But the court rejected that argument on the ground that litigating the validity of the patent in an antitrust challenge would undermine the benefits of the settlement.