Drug Patent Settlements Around the World

• Author: Michael A. Carrier
• DOI: 10.1177/0003603X17733357
• Published date: 01 December 2017
• Date: 01 December 2017

Article

Drug Patent Settlements

Around the World

Michael A. Carrier*

Abstract

One of the most pressing antitrust issues today involves settlements by which brand-name drug

companies pay generic firms to settle patent litigation and delay entering the market. Whether this

activity constitutes an antitrust violation is a subject that has occupied courts and enforcement

agencies around the world. This article focuses on the law in the United States, where the law is most

developed. It explores the issues courts have addressed after the Supreme Court’s 2013 decision in

FTC v. Actavis, including payment, the patent merits, the Rule of Reason, pleading requirements, cau-

sation, and state law. The article also analyzes European law and enforcement, in particular seven

monitoring reports and two significant rulings against companies. Finally, it briefly discusses devel-

opments in the UK, Canada, India, and Korea.

Keywords

antitrust, patent, pharmaceuticals, drugs, settlements

I. Introduction

One of the most pressing antitrust issues today involves settlements by which brand-name drug

companies pay generic firms to settle patent litigation and delay entering the market. Whether this

activity constitutes an antitrust violation is a subject that has occupied courts and enforcement agencies

around the world. This article focuses on the law in the United States, where the law is most developed.

It secondarily explores Europe, where the activity has received attention in recent years. Finally, it

briefly discusses developments in the UK, Canada, India, and Korea.

II. United States

A. Reverse-Payment Settlements

Brand and generic firms often settle patent infringement cases. Most of th ese settlements do not

present antitrust concern. Some do not delay entry at all. For example, in its most recent annual report,

*Distinguished Professor, Rutgers Law School, Camden, NJ, USA

Corresponding Author:

Michael A. Carrier, Distinguished Professor, Rutgers Law School, 217 N 5th St, Camden, NJ 08102, USA.

Email: mcarrier@law.rutgers.edu

The Antitrust Bulletin

2017, Vol. 62(4) 770-785

ªThe Author(s) 2017

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DOI: 10.1177/0003603X17733357

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the Federal Trade Commission (FTC) found that 20 out of 160 settlements between brands and

generics in 2013 and 2014 did not restrict generic entry.

1

Other settlements do not involve payment. The FTC report found that 111 settlements contained a

restriction on entry but did not provide compensation.

2

Courts and the FTC have concluded that these

“patent-term split agreements” do not violate the antitrust laws because they involve the parties

dividing the patent term by selecting a date for generic entry based on the strength of the patent. The

greater the likelihood that the patent is valid and infringed, the later in the period generic entry would

be expected.

It is the last category of payment and delayed entry (21 settlements) that presents concern. These

payments have been called “reverse payments” becaus e the consideration flows from patentee to

alleged infringer (unlike typical settlements in which alleged infringers pay patentees). A brand is

likely to gain additional exclusivity not warranted by the strength of the patent by supplementing the

parties’ entry-date agreement with a payment to the generic. And the quid pro quo for the payment

would appear to be the generic’s agreement to stay out of the market beyond the date that otherwise

reflects the parties’ assessment of the patent’s strength and likely outcome of litigation.

B. Pre-Actavis Case Law

Drug patent settlements first received attention from the FTC, the U.S. enforcement agency that takes

the lead on the pharmaceutical industry, in 2000, when the agency entered into two consent orders. The

first involved a payment of “millions of dollars” from brand Hoechst Marion Roussel (then Aventis) to

generic Andrx to delay bringing its hypertension drug to the market.

3

The second involved an agree-

ment by brand Abbott Laboratories to pay “substantial sums” to generic Geneva Pharmaceuticals to

delay bringing its hypertension and prostate drug to the market.

4

In the first case in which a U.S. appellate court examined the issue, the Sixth Circuit in In re

Cardizem CD Antitrust Litigation explained that the settlement at issue guaranteed to the brand that

“its only potential competitor” would “refrain from marketing its generic version of [the drug] even

after it had obtained FDA approval.”

5

The court also was concerned that the agreement prevented the

generic from marketing products not covered by the patent. It concluded that the settlement was “a

horizontal agreement to eliminate competition ...a classic example of a per se illegal restraint of

trade.”

6

Courts, however, quickly retreated from such analysis, turning to a test that essentially immunized

activity falling within the “scope of the patent.” The Eleventh Circuit in Schering-Plough Corp. v. FTC

upheld settlements that fell “within the protections of the ...patent” and stated that it “cannot be the

sole basis for a violation of antitrust law” for a brand firm with a patent to pay a generic competitor.

7

The Second Circuit in In re Tamoxifen Citrate Antitrust Litigation concluded that as long as “the patent

litigation is neither a sham nor otherwise baseless” or beyond the patent’s scope, the patentee can enter

into a settlement “to protect that to which it is presumably entitled: a lawful monopoly over the

1. FED.TRADE COMM’N,BUREAU OF COMPETITION,AGREEMENTS FILED WITH THE FEDERAL TRADE COMMISSION UNDER THE MEDICARE

PRESCRIPTION DRUG,IMPROVEMENT,AND MODERNIZATION ACT OF 2003: OVERVIEW OF AGREEMENTS FILED IN FY 2014, at 2 (2016),

https://www.ftc.gov/reports/agreements-filled-federal-trade-commission-under-medicare-prescription-drug-improvement-0.

2. Id.

3. FED.TRADE COMM’N, FTC CHARGES DRUG MANUFACTURERS WITH STIFLING COMPETITION IN TWO PRESCRIPTION DRUG MARKETS

(Mar. 16, 2000), https://www.ftc.gov/news-events/press-releases/2000/03/ftc-charges-drug-manufacturers-stifling-

competition-two.

4. Id.

5. 332 F.3d 896, 907 (6th Cir. 2003).

6. Id. at 908.

7. 402 F.3d 1056, 1076 (11th Cir. 2005).

Carrier 771