Today, the US Supreme Court refused to become involved in a closely watched case that tested the legality of multimillion-dollar settlements between big pharma drug companies and their generic rivals. The issue in that case was whether these big drug companies – such as Schering-Plough, the company involved in the case – should be allowed to pay generic rivals to stay out of the market in order to settle patent challenges. Schering-Plough has repeatedly maintained that these types of patent settlements are legal.

This case provoked a very open and public disagreement between the top two federal anti-trust regulators over whether such settlements should be allowed. In declining to hear the case, the Supreme Court sided with the Justice Department, and rejected the views of the Federal Trade Commission, the antitrust regulator that has criticized such settlements. The FTC maintains that such deals are anti-competitive and hurt consumers by keeping drug prices high. The US solicitor-general, writing for the Justice Department, sent a petition to the court in May saying that the Schering case was not a “good vehicle” to test the underlying legal question over the validity of the deals. (Why not?)

Earlier, the FTC had appealed a deal between Schering-Plough and Upsher-Smith Laboratories Inc. of Minneapolis for a generic alternative of the high blood pressure potassium supplement K-Dur 20. Under federal law, drugmakers are allowed to seek U.S. Food and Drug Administration approval for generic versions of brand-name drugs such as K-Dur before a drug’s patent expires. They must certify that the patent is invalid or will not be infringed by the new generic version. But the high court’s rejection of the appeal came after the FTC and the U.S. Solicitor General’s office, which brings federal government cases to the Supreme Court, openly argued over whether the justices should take this particular case.

U.S. Solicitor General Paul Clement, in a brief requested by the Supreme Court, said the FTC’s appeal “does not present an appropriate opportunity for this court to determine the proper standards for distinguishing legitimate patent settlements.” I still have not quite figured out what he really means.

In a brief filed June 12, the FTC general counsel William Blumenthal said the Solicitor General’s office was wrong to tell the justices to pass over this case. “The U.S. fails to appreciate the extent to which this ruling will place pharmaceutical patent settlements beyond antitrust scrutiny,” Blumenthal said. “The U.S. does not address the urgent practical reasons why immediate review is needed.”

In making its case for a hearing, the FTC alleged that the $60 million agreement, which among other things delayed marketing the generic alternative, violates federal antitrust laws. The FTC filed an administrative complaint in 2001 to stop the deal. An administrative law judge dismissed the matter in 2002, but the FTC overruled the judge in 2003. On appeal, the 11th U.S. Circuit Court of Appeals sided with Schering-Plough and Upsher-Smith, rejecting the FTC’s complaint.

Today, the Supreme Court rejected the FTC’s appeal despite the fact another similar case could be appealed to the Supreme Court regarding an agreement to delay introduction of a generic alternative to Tamoxifen, a breast cancer drug sold by AstraZeneca PLC.

After all the explanations by the Justice Department, why does this still seem like a “pay-off” to me and a dodge by the Court?

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