Update: The Third Circuit has refused to stay its ruling pending Supreme Court review. The defendant sought the stay in hopes of restraining the FTC and private plaintiffs from using the ruling to justify attacks on other drug patent settlements.
In In re: K-Dur Antitrust Litigation, the U.S. Court of Appeals for the Third Circuit has split with the Second, Eleventh, and Federal Circuits to hold that a payment by a patent-holding drug company to a generic competitor conditioned on the competitors holding a drug off the market is prima facie evidence of an anticompetitive agreement. Patent holders may rebut by demonstrating either that the payment (1) benefits competition or (2) constitutes compensation for something other than delayed market entry.
Prior decisions had emphasized the presumed validity of patents and the desire to settle disputes as justifying so-called pay-for-delay settlements. But the Third Circuit held that these considerations were outweighed by Congress’s intent in the Hatch-Waxman Act to employ “litigated patent challenges . . . to protect consumers from unjustified monopolies by name-brand drug manufacturers.” Judge Sloviter, writing for the panel, stressed that the “almost unrebuttable presumption of patent validity” created by the prior courts was insufficiently deferential to antitrust concerns. That presumption, she explained is merely a procedural device governing patent litigation “not a substantive right of the patent holder.”
“Many patents issued by the PTO,” she continued, “are later found to be invalid or not infringed, and a 2002 study conducted by the FTC concluded that, in Hatch-Waxman challenges made under Paragraph IV, the generic challenger prevailed 73% of the time. . . . [R]everse payments permit the sharing of monopoly rents between would-be competitors without any assurance that the underlying patent is valid.”
It is widely believed the Supreme Court will hear either this case or a recent Eleventh Circuit case involving the drug Androgel that was resolved in favor of the defendant, because of the clear split across circuits.
Like the Third Circuit, the European Commission has evinced its concern about pay-for-delay settlements by issuing two statements of objections. The first was issued to Lundbeck A/S, Merck, Ranbaxy Labs, and Xellia Pharmaceuticals. The EC is concerned that Lundbeck has entered anticompetitive agreements to forestall generic competition with its drug citalopram, which it markets under the brand names Celexa and Cipramil.
Shortly thereafter, the EC issued a statement of objections to Servier SAS and several generic drug manufacturers, accusing the French drug-maker of limiting generic competition with perindopril, a cardiovascular treatment marketed as Aceon.
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