The United States Supreme Court recently declined to review a Third Circuit ruling in favor of the Plaintiffs, holding that “reverse payment agreements” settling drug patent litigation that lack a cash payment to the generic manufacturer can raise antitrust scrutiny. With the Supreme Court declining to review the ruling, the Court has left in place a ruling that revives the Plaintiff’s pay-for-delay dispute against drug makers GlaxoSmithKline and Teva over the anti-convulsant drug, Lamictal.
In these “pay-for-delay” agreements, or “reverse payment agreements”, a brand-name drug company and a generic rival locked in patent litigation reach a settlement. Historically, the brand-name drug company may offer cash or something else of value to the generic drug company and, in return, gains more time to sell its brand drug without encountering lower-cost generic competition. The generic drug maker, meanwhile, also comes away with a large payment and an agreement to sell its generic equivalent at a specified future date.
In the case of In re Lamictal Direct Purchaser Antitrust Litigation, the Third Circuit looked at one of the biggest questions facing the courts in the wake of the Supreme Court’s 2013 landmark U.S. Federal Trade Commission v. Actavis decision: whether actual cash has to change hands for a reverse payment to occur.
Buyers of Lamictal, which is used to treat epilepsy and bipolar disorder, have claimed that GSK paid off Teva to delay its introduction of a generic version of the drug. Instead of exchanging a lump sum of cash, GSK compensated Teva, the generics maker, by agreeing not to launch its own authorized generic during Teva’s 180-day exclusivity window. The Plaintiff argued that no-authorized generic settlements like these amount to a “reverse payment” and can be scrutinized under antitrust laws. The reasoning is that such an agreement has considerable value to the first drug-maker to file for approval to make a generic version of a treatment.
This Lamictal litigation was originally filed in New Jersey where the New Jersey District Court dismissed the case on Dec. 6, 2012. The Plaintiff appealed and the Third Circuit Court of Appeals remanded the case after the Actavis decision, ordering the District Court to reconsider in light of Actavis. On remand, the New Jersey court affirmed its original dismissal in January of 2014 based on the Court’s conclusion that an antitrust violation can result from a settlement only if the brand manufacturer provides a large, unjustified payment of money as opposed to some other form of compensation.
On appeal in June 2015, the Third Circuit found that a cash payment was not necessary and so-called no-authorized generic settlement agreements could be considered a transfer from a brand drug manufacturer to a generic manufacturer and could be scrutinized under antitrust law.
Drug makers GSK and Teva filed a petition for Supreme Court review in February of this year, arguing that the justices should take the opportunity to clear up “disagreement and confusion” about what kinds of settlements can be scrutinized under Actavis. The United States Supreme Court declined to review the Third Circuit ruling.
These “pay-for-delay” agreements have raised antitrust concerns for years now. The Federal Trade Commission has estimated that these deals cost Americans $3.5 billion annually in higher health care costs. Challenging drug makers over these anticompetitive “reverse payment” agreements is just another way Plaintiffs can positively affect the price of prescription drugs in this country.
If you would like to know more about the pay-for-delay litigation, contact Ali Hawthorne, a lawyer in our firm’s Consumer Fraud & Commercial Litigation Section, at Alison.Hawthorne@beasleyallen.com.
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