[Ip-health] U.S.: Strong stand on pay-for-delay on drugs

[Meredith Filak]

http://www.scotusblog.com/wp/us-strong-stand-on-pay-for-delay-on-drugs/

U.S.: Strong stand on pay-for-delay on drugs

Posted By Lyle Denniston On July 6, 2009 @ 7:54 pm In New Filings |
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=97=97=96

Six times in recent years =97 as recently as two weeks ago =97 the Supreme
Court has refused to hear claims that it is illegal for a drug maker
holding a patent on a brand-name medicine to pay the maker of a generic
version to keep that version off the market or delay its entry. The
Court has done so, in part, at the suggestion of the federal government,
although Justice Department officials have expressed misgivings about
the practice and the Federal Trade Commission has condemned them as
illegal when large payments are involved.

On Monday, in a case directly related to the one the Justices turned
aside on June 22, the Obama Administration=92s Justice Department took a
strong stand, arguing that such =93reverse payments=94 are probably illegal
under antitrust law, especially if they involve a large payment. In the
case at issue, the patent holder paid $349 million to the maker of a
generic version of =93Cipro,=94 a brand-name antibiotic.

The [2] new Justice Department brief was filed in the Second Circuit
Court, in response to that Court=92s request in April for the government=92=
s
views. The case is Arkansas Carpenters Health and Welfare Fund, et al.,
v. Bayer, AG, et al. (Circuit docket 05-2851). The Arkansas Carpenters
litigation has been proceeding on parallel appeal tracks from the same
District Court ruling upholding a =93reverse payment=94 scheme involving Ci=
pro.

A petition bearing the same name was the one denied by the Justices last
month (docket 08-1194). That was an appeal from the Court of
Appeals-Federal Circuit. The Supreme Court had been asked either to hold
that case until after the Second Circuit ruled on the related case
before it, or to ask the Justice Department for the government=92s views.
The Court did neither, simply denying review =97 without explanation, as
usual.

In the new brief filed in the Second Circuit, the Department contended
that =93reverse payment=94 transactions should be subject to =93antitrust
scrutiny,=94 but they are not always illegal. They should be judged, it
said, under a =93rule of reason=94 when there is a claim that they harm
competition and thus may violate federal antitrust law.

But, it went on, when the transaction involves a payment to get a
generic drugmaker to drop a challenge to the patent on the brand-name
drug, and to stay out of the market at least for a time, that is
=93presumptively unlawful.=94 The consequence of such deals, it added, =93c=
an
be severe,=94 depriving consumers of =93significant benefits from price
competition in the pharmaceutical industry.=94

The companies involved in such an agreement, according to the brief,
should be given the opportunity to come forward with proof that the
payment did not =93purchase reduced competition.=94

If there is no other explanation for such a transaction, it said, =93such
a payment is naturally viewed as consideration for the generic=92s
agreement to delay entry=85=94 A payment in exchange for such exclusion, it
said, would be presumed illegal. A payment, however, might be defended,
it added, if it was no higher than what the patent holder would have
spent in defending the validity of its patent in court. An amount
=93greatly in excess=94 of that, it added, could mean antitrust liability
for harming competition.

In the Arkansas Carpenters cases, a group of labor unions, their health
benefit plans, and individual workers, all of whom are direct buyers of
the anti-biotic Cipro, plus benefit funds that are third-party payers
for the medicine. They are seeking to revive an antitrust lawsuti
against brand-name drugmaker, Bayer AG, and its U.S. subsidiary, Bayer
Corp., and a generic manufacturer, Barr Laboratories, Inc., along with
Barr=92s business partners who challenged Bayer, leading to the =93reverse
payments=94 deal.

A panel of the Second Circuit on April 6 asked the Justice Department to
file a brief on =93whether settlement of patent infringement lawsuits
violates the federal antitrust laws when a potential generic drug
manufacturer withdraws its challenge to the patent=92s validity, which if
successful would allow it to market a generic version of a drug, and the
brand-name patent holder, in return, offers the generic manufacturer
substantial payments.=94

The panel held a hearing on the case on April 28, without waiting for
the Justice Department=92s views. On the same day of the hearing, it asked
the Department another question: whether the Circuit Court had
jursidiciton over the case where the probability of invalidity of the
Cipro patent =93may be an issue.=94

After answering the first question, suggesting potential illegality, the
Department argued that the Circuit Court does have jurisdiction. Such a
case, it said, does not require a claim that raises an issue under
patent law.

=93If the settlement involves a payment in exchange for the generic
manufacturer=92s areement to withdraw the challenge to the patent and to
delay entry, there is no need to determine whether the patent would in
fact have been held invalid in order to conclude that the settlement
likely disadvantaged consumers,=94 the brief argued.

If an antitrust lawsuit over a =93reverse payment=94 can be analyzed under =
a
rule of reason approach, that would not require that the case be
diverted from a regular Circuit Court to the Federal Circuit, it contended.

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[1] :
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[2] new Justice Department brief:
http://www.scotusblog.com/wp/wp-content/uploads/2009/07/us-br-cipro-cta2.pd=
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