U.S. Supreme Court is Again Asked to Take Up Drug Patent Settlement Agreements; This Time It’s ANDROGEL

October 8, 2012

By Kurt R. Karst –      

Just weeks after Federal Trade Commssion (“FTC”) Chairman Jon Leibowitz signaled in a speech that the Commission would appeal to the U.S. Supreme Court the U.S. Court of Appeals for the Eleventh Circuit’s April 2012 ruling (and subsequent July 2012 denial of the FTC’s Petition for Rehearing en banc) affirming a February 2010 decision by the U.S. District Court for the Northern District of Georgia largely dismissing multidistrict litigation brought by the FTC (and certain private plaintiffs) challenging certain drug patent settlement agreements in which Solvay Pharmaceuticals, Inc. (“Solvay”) allegedly paid some generic drug companies to delay generic competition to Solvay’s drug product ANDROGEL (testosterone gel) (see our previous posts here and here), the FTC filed a Petition for Writ of Certiorari asking the U.S. Supreme Court to take up the case (Supreme Court Docket No. 12-416). 

In Androgel, the FTC filed a Complaint (originally filed in the U.S. District Court for the Central District of California) alleging that Solvay and certain generic drug companies violated various federal antitrust laws when they agreed to dismiss patent infringement litigation on U.S. Patent No. 6,503,894 in exchange for a profit-sharing arrangement and provided the generic competitors would not launch their generic versions of ANDROGEL until 2015.  The Georgia District Court, in granting the defendants’ Motion to Dismiss, found that the settlements are not an unreasonable restraint of trade under applicable law and that the FTC failed to state an antitrust claim.  In affirming the district court decision, the Eleventh Circuit held that, “absent sham [patent] litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.”  In late September, the Georgia District Court dismissed the remaining claims in the case brought by the private plaintiffs concerning sham patent infringement litigation and concluded that they were not objectively baseless as a matter of law. 

The FTC’s Petition comes in the wake of two other Petitions for Writ of Certiorari (Supreme Court Docket Nos. 12-245 and 12-265) asking the U.S. Supreme Court to review the July 2012 decision by the U.S. Court of Appeals for the Third Circuit in In Re: K-DUR Antitrust Litigation.  In that case, and in contrast to the Androgel decision, the Court rejected the so-called “scope of the patent test” when considering whether patent settlement agreements violate the antitrust laws, and instead applied a “quick look rule of reason” (see our previous posts here and here).  Under that analysis, “the finder of fact must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit.” 

The K-Dur Petitions have already drawn significant attention.  Amicus briefs have been filed by PhRMA, GPhA, the Washington Legal Foundation, Bayer Corporation, and the New York Intellectual Property Law Association (available here, here, here, here, and here).  Our friends over at Patent Docs have taken a close look at several of the amicus briefs in posts over the past couple of weeks.

In its Androgel Petition, the FTC presents the following question to the U.S. Supreme Court, juxtaposing the Androgel and K-Dur decisions: “Whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the [Eleventh Circuit] held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit held).”  In arguing for Supreme Court review, the FTC launches into why Androgel was wrongly decided:

The decision below is incorrect.  In the Eleventh Circuit’s view, a reverse-payment agreement is lawful unless it imposes greater restrictions on generic competition than would a judicial ruling that the brand-name manufacturer’s patent is valid and infringed.  That approach effectively equates a brand-name manufacturer’s allegation of infringement with a judgment in the manufacturer’s favor.  But defendants oftent prevail in patent-infringement suits; the Hatch-Waxman Amendments are designed to facilitate judicial resolution of validity and infringement issues in the generic-drug context; and the federal antitrust laws flatly prohibit potential competitors from forming naked agreements not to compete.  The anticompetitive potential of reverse-payment agreements – which are estimated to cost consumers billions of dollars annually – is sufficiantly clear that they should be treated as presumptively unlawful under the federal competition laws.  [(Emphasis in original.)]

The FTC puts forth several reasons why Supreme Court review is warranted and says that Androgel “is a superior vehicle for addressing the question presented because it is brought by an agency charged by Congress with challenging unfair methods of competition, and it comes to the Court in the straightforward posture of a final judgment following the dismissal of the FTC’s complaint for declaratory and injunctive relief.” 

These are the same reasons cited by FTC Commissioner J. Thomas Rosch in a speech given prior to the filing of the FTC’s Androgel Petition.  In that speech, Commissioner Rosch shared his views as to what he believes are the six reasons the Supreme Court, despite having declined several prior Petitions on drug patent settlement cases, will grant certiorari in either or both of the K-Dur and Androgel cases, and why Androgel is better postured for Supreme Court review.  According to Commissioner Rosch:

[T]he Androgel case would be the better vehicle for Supreme Court review of the pay-for-delay issue.  First, the case was decided on a motion to dismiss so it presents a pure issue of law.  In contrast, the K-Dur decision was decided on summary judgment.  Second, the Eleventh Circuit’s decision was a final judgment; the Third Circuit’s decision was not.  Further proceedings in the K-Dur case could help clarify the application of the Third Circuit’s new test.  Third, the Androgel case was brought by one of the two federal agencies charged with protecting consumer interests through the enforcement of the antitrust laws.  The K-Dur case was brought by private plaintiffs, and the FTC’s role has been limited to that of an amicus.

Commissioner Rosch also said that he expects Congress to remain relatively quiet on drug patent settlement legislation . . . at least until there is something out of the Supreme Court.  “[I]f and when the Court rules on the issue, there is likely to be a strong push by the losing side for legislation to overturn the Court’s decision,” said Commissioner Rosch.

In other drug patent settlement news, we note that the U.S. District Court for the District of New Jersey recently denied the FTC’s motion for leave to file an amicus brief (see our previous post) in private antitrust litigation concerning Wyeth Pharmaceuticals Inc.’s anti-depressant drug EFFEXOR XR (venlafaxine HCl) Extended-release Tablets.  One issue in that case is whether a branded drug company’s commitment not to launch an Authorized Generic (“AG”) to compete with a generic version of the product approved under an ANDA constitutes a “payment” under K-Dur.  The FTC’s proposed amicus brief stated that a “No-AG” agreement is a “convenient method” for brand-name drug companies to pay generic patent challengers to delay their entry into the market, and that the Third Circuit’s K-Dur decision should not be limited to overt cash payments.  In denying the FTC’s motion, the New Jersey District Court found that “the FTC has not expressed an interest that is not represented competently in this case,” and that “the extent to which the FTC is partial to a particular outcome weighs against granting the agency’s motion.”

Finally, in recent closing letters (here and here), the FTC concluded that “no further action is warranted” as a result of the Commission’s nonpublic investigation to determine whether certain companies engaged in any unfair methods of competition that violate the FTC Act by entering into agreements regarding the oral contraceptive drug products YASMIN and YAZ containing drospirenone and ethinyl estradiol.