The U.S. Federal Trade Commission claims drug makers–Abbott Laboratories, AbbVie, and Teva Pharmaceuticals–violated antitrust laws.
Why the FTC Lawsuit over Pay-To-Delay Deals Matters: Carrier Explains
Sep 23, 2014
Earlier this month, the U.S. Federal Trade Commission filed a lawsuit charging drug makers – Abbott Laboratories, AbbVie and Teva Pharmaceuticals – with violating antitrust laws and hurting consumers. Specifically, the agency alleged they reached deals to postpone the availability of the widely promoted AndroGel testosterone treatment. This was the first time the FTC filed such a lawsuit since the U.S. Supreme Court last year ruled that so-called pay-to-delay deals may be subject to greater antitrust scrutiny. We spoke with Michael Carrier, a Rutgers University School of Law professor who specializes in intellectual property, about the implication of the FTC’s latest actions and another litmus test for deciding whether pay-to-deals will weigh on the pharmaceutical industry. Pharmalot: You had told me that a lot of people were waiting to see what the FTC would do. Why? Carrier: Okay, so we know that in June 2013, the Supreme Court said a pay-for-delay settlement could violate antitrust laws. The concern is that a brand-name company pays a generic company to leave the market or delay entering the market. The FTC had been pressing the antitrust argument, but only has two cases in the courts, one of which was appealed to the Supreme Court. The agency has limited resources. With that ruling, however, the FTC was told it could continue with this kind of pharmaceutical litigation. So everyone wondered which case it would choose to show its strongest card. That’s something everyone has been waiting to see. Pharmalot: Why this case and what are the implications? Carrier: It’s an interesting one because a lot of the lawsuit doesn’t focus on the settlements [between the drug makers]. Instead, it focuses on what the FTC calls sham litigation. What does this mean? If you’re the patent holder, you’re able to sue someone when they infringe on your patent. But sometimes, they don’t have a case so they file what is known as sham litigation, which is like a company knowing it doesn’t have a good case, but files a lawsuit to hurt a competitor. And this may delay the process of a generic drug coming to market. Then the question is whether this is the only thing going on here. The FTC says no because the generic company agrees to drop its case and agrees to a settlement. Pharmalot: Why is that an important distinction? Carrier: It shows the FTC thought it had good facts here and put a lot of those facts in its complaint. So maybe at end of the day, the facts are so good and tied to a potentially concerning settlement that it’s really the agency putting its best foot forward. Their goal is to show the patent holder was filing the litigation even though they knew they had no chance of success. The policy implications with these reverse payments [which is the term used by the pharmaceutical industry to describe the agreements] are interesting and complex issues. This involves antitrust law, which is about promoting competition, and patent law, which is about fostering innovation. The Supreme Court answered a lot of those questions. But stepping back for a moment, between 2004 and 2012, most appellate courts found these agreements were fine. The reasoning was that if you have a patent, there’s nothing to worry about, at least from an antitrust point of view. The Supreme Court changed the balance and said antitrust still has a role to play. So the issues will be played out in this case brought by the FTC and the others in the courts – they will explore the tradeoff between antitrust and patents, and how this will get resolved. Pharmalot: Of course, the FTC still has to win to prove its point. What’s at stake? Carrier: If the FTC loses this case, as well as the other two ongoing cases, that will mean the Supreme Court decision is not having a significant effect on the marketplace, on the legal analysis of these agreements on consumers. But it also depends on which part of their argument is lost, whether it’s about sham litigation or about the settlement. Remember, there are also a lot of private plaintiff lawsuits going on in the courts. The private plaintiffs include direct purchasers of the drugs – insurers or consumers – and indirect purchases such as pharmacies. So even if the FTC strikes out, there could be relief through private plaintiffs. By relief, I mean a finding that supports the FTC view… There are at least 15 to 20 cases of this sort in the court system. And it’s conceivable that private plaintiffs have a stronger case, based on available facts, than the FTC. There’s another point I want to raise, though. Pharmalot: What’s that? Carrier: Perhaps the most important issue going forward, in general, is whether a deal involves a cash payment from the brand-name drug maker to the generic company… The settlements today don’t take the form of naked cash transfers. For years, the companies have been settling cases in other ways. But there are a whole range of ways in which there is a settlement. One of the most common ways is for a brand-name drug maker to make what’s called a ‘no authorized generic’ pledge, which is an agreement not to sell its own authorized generic. Some courts say that kind of agreement doesn’t count as anticompetitive. In the case brought by the FTC, there was no cash payment. So the question is whether the court will say the deal involves a type of agreement that can be considered anticompetitive. If a lot of courts adopt the position that anything other than a cash payment is not anticompetitive, my view is the ruling by the Supreme Court will be decimated. Originally posted on blogs.wsj.com by Ed Silverman Los Angeles Pharmaceutical Lawyer – Ball & Bonholtzer