FTC Reports on Pharmaceutical Patent Settlement Agreements

The FTC issued its annual report on pharmaceutical patent settlement agreements that are required to be filed with the FTC under the 2003 Medicare Modernization Act. The chart below (taken from the FTC's report) categorizes the agreements based on whether there is a restriction on the generic's ability to compete and what compensation, if any, flows between the parties. As explained in the previous post, the Senate held hearings on reverse payment settlement agreements on Wednesday, and a bill may soon be introduced that outlaws such payments.

Senators To Introduce Bill To Stop "Reverse" Settlement Payments That Delay Introduction of Generic Drugs

On Wednesday, January 17, 2007, the Senate Judiciary Committee held a hearing entitled "Paying Off Generics to Prevent Competition With Brand Name Drugs: Should It Be Permitted?" Senators Leahy, Kohl, Grassley, Feingold, and Schumer voiced their support for a bill to prohibit settlement agreements between brand-name and generic pharmaceutical companies that would delay the introduction of the generic drug. These so-called "reverse payment settlements" have been a hot topic in antitrust law and the subject of several previous blog posts. See here, here, here and here.

The Senators commented that in 2005, two appellate decisions overturned FTC enforcement actions that challenged the reverse payment settlements. See Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005) (overturning an FTC ruling that Schering-Plough's agreement with generic over its blood pressure drug K-Dur was anticompetitive); In re Tamoxifen Citrate Antitrust Litigation, 429 F.3d 370 (2nd Cir. 2005) (affirming district court's decision to dismiss similar case involving AstraZeneca's cancer drug Tamoxifen). This summer the Supreme Court declined to grant cert in Schering-Plough. In December, the plaintiffs in Tamoxifen filed a petition for cert arguing that their case is more appropriate for review than Schering Plough. The Supreme Court has not yet decided whether it will hear Tamoxifen.

In Wednesday's hearing, FTC Commissioner Jon Leibowitz testfied in support for legislation banning reverse payment settlements. He said that these agreements were growing in number. He reported that there were 14 patent settlements in which a generic competitor received compensation and agreed to restrict the introduction of a new generic drug. That was half of all the drug patent settlements reached in 2006 and double the number in 2005.

The FTC and the above-mentioned Senators are particularly concerned with reverse payment settlements in the context of the Hatch-Waxman Act, which grants the first generic ANDA-filer a 180-day exclusive marketing period that does not commence until the generic enters the market.

In Schering Plough and Tamoxifen, however, the 11th Circuit and 2nd Circuit held that such reverse payment settlement agreements are not per se unlawful. The bill that is planned to be introduced in the Senate -- the "Preserve Access to Affordable Generics Act" -- will explicitly prohibit brand-name drug manufacturers from paying to keep generics off the market. Senator Leahy stated that this "bright-line approach" would "avoid endless litigation and set forth a clear standard." The House is said to be entertaining similar legislation.

It will be interesting to see who acts first, Congress or the Surpreme Court. If Congress enacts a bill that makes reverse payment settlements per se illegal, will the Court be less inclined to grant cert because the issue (at least prospectively) will be resolved? If the Supreme Court grants cert in Tamoxifen, will Congress wait until the Court's decision to act?

Stay tuned for more developments...

NC Court of Apeals Allows Quran Lawsuit To Continue

On Tuesday, January 16, 2007, the North Carolina Court of Appeals issued its opinion in ACLU v. North Carolina, a case addressing whether the Quran is a "Holy Scripture" upon which witnesses and jurors may take oaths. Although the case does not involve antitrust law, the court's decision was on the front page of my local newspaper, so I decided to write a post about it.

North Carolina law mandates that a person giving an oath "shall ... require the party to be sworn to lay his hands upon the Holy Scriptures" N.C.G.S. 11-2. The American Civil Liberties Union of North Carolina (ACLU-NC) filed suit seeking a declaratory judgment that the term "Holy Scriptures" refers not only to the Christian Bible, but also to other religious texts such as the Quran, the Old Testament, and the Bhagavad-Gita. Alternatively, if the statute excluded these other religious texts, the ACLU-NC sought a declaratory judgment that the statue was unconstitutional under the federal and state constitutions.

The state trial court dismissed the suit after ruling that no actual case or controversy existed among the parties. The Court of Appeals, however, found that the complaint presented a justiciable controversy under North Carolina's Declaratory Judgment Act. The Court of Appeals explained that that "we are careful to express no opinion on the merits of those claims."

As was reported in the Greensboro News and Record, this case began when Syidah Mateen asked to take her oath on a Quran in a Guilford County court during a domestic-violence hearing. After being told that she could not do so because the court did not have any, Mateen and other members of Greensboro's Al-Ummil Ummat Islamic Center donated eight Qurans to Guilford County courts. Their offer was rejected, however, because the Guilford County judges determined that state law only allows for oaths on the Bible. When the Administrative Office of the Courts did not intervene, the ACLU-NC filed suit in Wake County Superior Court on behalf of its 8,000 members, some of whom are Jewish and Muslim and would prefer to take oaths on a holy text other than the Christian Bible. Mateen was later added as a plaintiff.

The North Carolina Court of Appeals addressed whether the ACLU-NC and Mateen had standing under North Carolina's Declaratory Judgment Act. The operative test was whether litigation was "unavoidable." The Court stated:

We consider this question first with respect to plaintiff Syidah Mateen. When Ms. Mateen appeared as a witness, she requested that her oath to tell the truth be sworn on the holy text of her religious faith, the Quran. When her request was denied and because she would not swear on the Christian Bible, her options were to affirm without the use of a religious text or be denied the opportunity to testify.... Ms. Mateen chose to affirm to tell the truth, and she now seeks a declaratory judgment determining whether, under N.C.G.S. § 11-2, she has the right to swear on her holy text, the Quran. Under these circumstances, Ms. Mateen clearly demonstrated her intent to avail herself of her asserted right to swear on her religious text and her intent to litigate that right. The State has clearly demonstrated, by its refusal to permit witnesses to swear on any text other than the Christian Bible, its intent to continue the course of action; thus, its actions are not speculative. The facts do not suggest any impediments to litigation that would make litigation avoidable in the absence of a declaratory judgment. Finding no impediment to litigation, we conclude that litigation between plaintiff Mateen and defendant is unavoidable.

We next consider whether an impediment to litigation exists between ACLU-NC and the State. ACLU-NC submitted affidavits from eight of its members from Guilford County, eligible for jury duty, who are Jewish and would prefer to swear on the Old Testament rather than the Christian Bible. ACLU-NC further alleged that it has approximately 8,000 members throughout the state, many of whom are of Islamic or Jewish religious faith. ACLU-NC argues that it is not a matter of “if” one of its members who would prefer to swear on a different religious text will be called to serve as a juror or witness, but rather it is a matter of “when.” We agree. ACLU-NC has sufficiently indicated that its members intend to avail themselves of their rights, and ACLU-NC has manifested an intent to litigate the issue. The State's policy is not speculative. Although it cannot be predicted exactly when or how much time will pass until a member of ACLU-NC who would prefer to swear on a holy text other than the Christian Bible is required to take an oath in court, there is sufficient practical certainty that such situation will occur. Accordingly, there is no impediment to litigation which would render litigation avoidable. Because litigation is unavoidable, the case is justiciable under the Declaratory Judgment Act, allowing ACLU-NC to obtain from the court an interpretation of N.C.G.S. § 11-2 and the rights of its members under the statute.

SCOTUS Reverses MedImmune On Standing Grounds

On January 9, 2007, the Supreme Court issued its opinion in MedImmune, Inc. v. Genetech, Inc., No. 05-608. This case originally involved antitrust claims, but the high court's opinion was based on the standing requirements of Article III.

The patent licensee had brought a declaratory judgment action against the patent owner challenging the validity of a biotech patent and a violation of the Sherman Act based on an interference settlement between the patent owner and another biotechnology company. The Federal Circuit affirmed the district court's dismissal of the suit for lack of jurisdiction because a patent licensee in good standing cannot bring a declaratory judgment action to challenge a patent it had licensed. The Federal Circuit also rejected the patentee's theory that the interference settlement was per se illegal under the Sherman Act.

The Supreme Court's decision reversed the Federal Circuit's jurisdictional ruling but did not address the antitrust issue. The Court held that the "case or controversy" requirement did not require the licensee to materially breach the license agreement before challenging the licensed patent. Justice Scalia wrote: "The rule that a plaintiff must destroy a large building, bet the farm, or (as here) risk treble damages and the loss of 80 percent of its business, before seeking a declaration of its actively contested legal rights finds no support in Article III." The Court rejected the patent owners argument that the parties settled this dispute when they first entered into the licensing agreement and distinguished the common law rule that a party to a contract cannot at one and the same time challenge its validity and continue to reap its benefits. The Court left it up to the lower courts on remand to consider whether there were any prudential or merits-based arguments for denial of declaratory relief.

Football Fairness Act of 2007

As reported in the San Francisco Chronicle, California Senator Dianne Feinstein introduced legislation in the Senate that would grant the National Football League limited exemption from antitrust law. The measure, called the Football Fairness Act of 2007, would give the NFL the right to block a team's move, thus giving cities the opportunity to lobby NFL owners to keep a franchise. The NFL supported the measure, saying: "We have long supported legislation that would continue the right of sports leagues to determine the markets where their franchises are located." Major League Baseball enjoys broad antitrust exemption which allows owners to vote on relocations. Only one baseball team has relocated in the past 25 years (the Montreal Expos moved to Washington, D.C. and were renamed the Washington Nationals). During the same time period, seven NFL teams have moved.