Today, the Senate Judiciary Committee held a meeting to discuss the topic of reverse payments in a session entitled, “Paying Off Generics to Prevent Competition with Brand Name Drugs: Should It Be Prohibited?” Sen. Patrick Leahy (D-VT) is chairman of the committee.

Some of the witnesses are Commissioner of the Federal Trade Commission, Jon Leibowitz, former Rep. Billy Tauzen (R-LA), and CEO of Barr Pharmaceuticals, Bruce Downey. Leibowitz was to present the FTC’s views on reverse payments and the effect of reverse payment out-of-court settlements on delaying generic market entry. A reverse payment is the practice where a brand company pays a generic firm to delay the launch of a competing generic product.

The U.S. Federal Trade Commission (FTC) is concerned about the recent use of anti-competitive drug patent deals in light of recent court rulings, which may spur drug companies to step up a practice of paying generic rivals to keep alternatives off the market.

The FTC has filed a series of lawsuits challenging patent settlement agreements between major drugmakers and generic companies. The agency contends that in some cases those settlements stifle competition because drugmakers are paying generics to stay out of the market.

An earlier decision in Schering-Plough makes it very difficult (if not impossible) for parties challenging patent settlements to do so based on the terms of the settlement itself (i.e., the inclusion of a reverse payment). Plaintiffs will need to show that the generic company’s product did not infringe on a valid patent – a high hurdle to get over indeed.

The Supreme Court denied certiorari in Schering-Plough where the FTC asked:

1. Whether an agreement between a pharmaceutical patent holder and a would-be generic competitor, in which the patent holder makes a substantial payment to the challenger for the purpose of delaying the challenger’s entry into the market, is an unreasonable restraint of trade.

2. Whether the court of appeals grossly misapplied the pertinent “substantial evidence” standard of review, by summarily rejecting the extensive factual findings of an expert federal agency regarding matters within its purview.

In a related matter, after declining to take up the issue in Schering-Plough, consumer groups are now petitioning the Court to basically take up the same issue in the similar case In re: Tamoxifen Citrate Antitrust Litigation.

Earlier this month, Sen. Herb Kohl (D-Wis.), the incoming chairman of the Judiciary Committee’s Antitrust, Competition Policy and Consumer Rights Subcommittee, re-introduced the “Preserve Access to Affordable Generics Act,” a bill that would prohibit brand drug manufacturers from using out-of-court settlements known as reverse payments to delay generic entry into the market.
See earlier testimony here.


Drug Patent Deals Raise FTC Concerns

Are There Competitive Problems in Pharmaceutical Markets? The FTC says “Yes”

How Settlements Make Strange Bedfellows: Or How the Federal Trade Commission has Managed to Unite the Entire Pharmaceutical Industry (but only in Opposition to the FTC’s Position on Exclusion Payment Settlements)

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