Supreme Court hears patent-settlement case

Case could determine future of generic drug industry, industry group says

NEW YORK — The Supreme Court heard arguments Monday in a case that could determine the future of generic drugs in America.

The case, Federal Trade Commission v. Actavis, marks the latest attempt by federal authorities to put an end to what they say are deals between branded and generic drug companies that delay release of generic drugs to consumers.

The case centers on a common practice in which a generic drug company that wishes to market a version of a branded drug before its patent expires files an approval application with the Food and Drug Administration containing a Paragraph IV certification, a legal assertion that the patent is invalid, unenforceable or won't be infringed. In response, the branded drug company will generally file a patent-infringement lawsuit to stop the FDA from approving the drug. The companies will often reach a settlement that ultimately allows the generic drug company to launch well before patent expiration, and under current laws, a generic version must be launched by the time the patent expires anyway.

For the FTC, as well as many members of Congress and consumer groups, the issue is when the generic drug company agrees to hold off launching the drug in exchange for some type of consideration from the branded drug company, such as monetary payment or an agreement by the latter not to launch a cheaper version of the drug through a third-party company, also known as an authorized generic. Opponents of such deals call them "pay-for-delay" settlements and contend that they keep drugs out of the hands of consumers for longer than if no settlement had taken place.

"If there's money on the table, the generic firm will accept a later entry date," David Balto, former FTC policy director under the Clinton administration, who filed an amicus brief with the court in support of the FTC's position, told Drug Store News. "If there's no money on the table, the generic firm will bargain for the earliest possible entry date."

Balto expressed optimism for the FTC side, saying that the court appeared highly skeptical of the generic drug industry's position. "Ultimately, this will be very good for consumers because the FTC's position will get generic drugs into the hands of consumers faster," Balto said.

Meanwhile, the Generic Pharmaceutical Association (GPhA) contends that the settlements are ultimately pro-consumer because they get generic drugs to the market months or years ahead of patent expiry. The group points to a 2010 study by the Royal Bank of Canada of 370 patent-litigation suits, which found that when the suits went to trial, the generic drug industry prevailed 48% of the time, compared with 76% of the time when litigation was settled.

"The FTC's case is built on a house of cards," GPhA president and CEO Ralph Neas said in a conference call with reporters Monday, saying the agency's position relied on "assumptions and methodologies that are false" and based on a study more than 10 years old.

"We believe the FTC's position, if upheld by the court, would harm consumers," Actavis president and CEO and former GPhA chairman Paul Bisaro said in the call.

In the Senate, a bill is under consideration that would also seek to restrict patent settlements between branded and generic drug companies. In a recent white paper, former Clinton administration solicitor general Paul Bender called the bill, S. 214, "hopelessly flawed," saying it would interfere with litigant rights to settle, create unfair burdens of proof, conflict with the statutory presumption of patent validity, frustrate provisions in the Hatch-Waxman Act of 1984 that favor litigation and preclude settlements.

"Rather than adopting that unusual and dangerous solution, the government should utilize the tools it has in hand under the Medicare Modernization Act of 2003 that require the FTC to review and prove the illegality of settlements on a case-by-case basis," Bender wrote.

 

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