Friday, January 19, 2007, 2:33 PM

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

Authored by: Jason Hicks
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...

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