Former FTC Staffer Recommends a “Moderate Approach” to “Reverse Payment” Settlements; Bills Would Outlaw Them

May 9, 2007

Yesterday, a former Federal Trade Commission (“FTC”) staffer recommended that drug companies follow a “moderate approach” in pursuing “reverse payments” — payments made by brand name companies to generic drug companies to persuade the generic companies to stay off the market for a particular drug.  Such payments are made in the context of a patent infringement settlement agreement.  The comments were made during a May 7, 2007 panel discussion at the BIO International Convention. 

The Federal Trade Commission (“FTC”) has contested a number of reverse payment settlements.  Last week, FTC Commissioner Jon Leibowitz testified before the House Subcommittee on Commerce, Trade, and Consumer Protection of the Committee On Energy and Commerce that “recent court cases have made it more difficult to bring antitrust cases to stop exclusion payment settlements between brand manufacturers and their generic competitors, and that ‘the impact of the court rulings is becoming evident in the marketplace.’”  Commissioner Leibowitz’s testimony was given at a hearing on H.R. 1902 introduced by Rep. Bobby Rush (D-IL).  That bill would end such settlement arrangements.

Earlier this year, Rep. Henry Waxman (D-CA) introduced H.R. 1432, the “Preserve Access to Affordable Generics Act.”  The bill also seeks to end reverse payment settlements.

Rep. Waxman’s reverse payment bill, if enacted, would amend the Clayton Act to add new § 28 (Unlawful Interference With Generic Marketing) making it unlawful for a person, in connection with the sale of a drug product, to be a party to any “agreement” (as defined in § 1 of the Sherman Act) resolving or settling a patent infringement claim in which: (1) an ANDA applicant receives anything of value; and (2) such generic applicant agrees not to research, develop, manufacture, market, or sell the generic product for any period of time.  However, the bill would exclude a resolution or settlement that includes no more than the right to market the generic product prior to the expiration of the patent:

Nothing in [§ 28] shall prohibit a resolution or settlement of patent infringement claim in which the value paid by the NDA holder to the ANDA filer as a part of the resolution or settlement of the patent infringement claim includes no more than the right to market the ANDA product prior to the expiration of the patent that is the basis for the patent infringement claim.

The bill would also amend § 1112 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) to set forth additional filing requirements related to agreements between brand name and generic drug companies. MMA § 1112(c)(2) currently states:

The parties that are required in [MMA § 1112] (a) or (b) to file an agreement in accordance with this subsection shall file with the Assistant Attorney General and the [FTC] the text of any agreements between the parties that are not described in such subsections and are contingent upon, provide a contingent condition for, or are otherwise related to an agreement that is required in [MMA § 1112] (a) or (b) to be filed in accordance with this subsection.

H.R. 1432 would add a second report requiring parties to file with the Assistant Attorney General and the FTC “a description of the subject matter of any other agreement the parties enter into within 30 days of an entering into an agreement covered by [MMA § 1112] (a) or (b).”  The bill also requires the Chief Executive Officer or the company official responsible for negotiating any agreement to file a certification that materials filed with respect to such agreements are complete, final, and exclusive.

Finally, H.R. 1432 would amend the 180-day exclusivity forfeiture provision at FDC Act § 505(j)(5)(D)(i)(V) to provide that an ANDA applicant that is a “first applicant” forfeits exclusivity if an agreement violates new § 28 of the Clayton Act.

Categories: Hatch-Waxman