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WASHINGTON — The Supreme Court jolted the pharmaceutical industry with its ruling last month that antitrust regulators should be able to challenge arrangements that allow rival drug makers to delay the sale of a generic drug.
Under such strategies, known as “reverse payments” or “pay for delay,” brand name drug makers facing a patent challenge from generic competitors pay them to temporarily refrain from entering the market.
And in another late June ruling, the high court relieved a generic drug manufacturer of injury liability in a case in which a woman lost over 60% of her skin and suffered other severe injuries after having an allergic reaction to sulindac, a prescribed generic painkiller. The court ruled that the generic maker wasn’t liable for the anti-inflammatory drug’s content or warning label because it must mimic the brand name drug in both instances.
For over a decade the Federal Trade Commission has tried to restrict reverse payments, arguing that they’re anticompetitive. Four federal courts have addressed the issue in recent years, and only one has sided with the FTC’s legal analysis (the rest dismissed the cases).
In its 5-to-3 decision, written by Justice Stephen Breyer, the Supreme Court ruled that the FTC should have been given the opportunity to prove its claims in a case involving a testosterone product called AndroGel. These types of arrangements can “sometimes” violate antitrust laws and should be subject to more scrutiny, the justices concluded.
Solvay Pharmaceuticals, the maker of AndroGel, had agreed to pay the generic drug maker Actavis an estimated $19 million to $30 million annually for nine years to temporarily block it from bringing a generic version of the drug to market. It planned to pay millions of dollars more to two other generic drug firms that challenged its AndroGel patent.
The FTC sued to block the deals in 2009. But a district court dismissed the agency’s complaint, and a federal appeals court affirmed the decision using a legal theory cited by other courts in similar cases.
The appeals court found that the deals are lawful (with narrow exceptions) as long as the rival companies agreed to allow the generic drugs to reach the market before the patent for the brand name drug expired. But the Supreme Court rejected that reasoning and sent the case back to the lower court.
“We are pleased that the court rejected the FTC’s proposed ‘quick look’ test and did not rule that settlement agreements are presumptively unlawful,” said Paul Bisaro, president and chief executive officer of Actavis. “Rather, the court has established that the ‘rule of reason’ be applied and left it to the lower courts to determine if the benefits of the settlement outweigh harm to consumers. We believe this decision continues to provide for a lawful and legitimate pathway for resolving patent challenge litigation in a manner that is pro-competitive. The court’s ruling, however, does place an additional and unnecessary administrative burden on our industry.
“Patent settlements have saved and continue to save consumers billions of dollars and ensure more-timely introduction of generic competition. We plan to continue to defend the propriety of such settlements against any further legislative or judicial challenges.”
Although FTC chairwoman Edith Ramirez hailed the top court’s decision, Generic Pharmaceutical Association (GPhA) president and chief executive officer Ralph Neas noted that the court’s ruling will require generic companies to take on a greater administrative burden to pursue a patent challenge.
“GPhA’s hope is that the implementation of this ruling in the courts will be efficient and will not reduce the number of challenges under the Hatch-Waxman law, which has proven a reliable path to ensure patients access to cost-saving generics as soon as possible,” he asserted.
In the product liability case (Mutual Co. v. Bartlett), the generic drug maker had challenged a $21 million state court award to Karen Bartlett, citing federal court precedent. GPhA’s Neas noted that the ruling upholds “a key principle”: Decisions about the safety and efficacy of prescription drugs should rest with scientific experts at the Food and Drug Administration.
“When it comes to decisions on the safety and approval of prescription medicine, the FDA is best equipped to make judgments that affect patients,” said Neas. “Millions of patients rely on drugs like sulindac, which has been on the market for more than 30 years. It was prescribed and dispensed more than 300 million times between 2007 and 2012 with a typical safety profile. Decisions with this much at stake belong in the hands of the scientific, public health and regulatory experts.”
