US FTC amicus brief urges Appeals Court to overturn District Court decision on pay-for-delay deals

The USA’s Federal Trade Commission last week filed an amicus brief in the US Court of Appeals for the First Circuit urging the court to reject a district court decision in a reverse-payment patent settlement case holding that an alleged non-cash payment from a brand to a generic to delay entering with its generic version of the branded drug escapes antitrust scrutiny because the payment was not in cash.

Reverse-payment patent litigation settlements, sometimes referred to as “pay-for-delay” settlements, are agreements in which a brand-name drug manufacturer pays a would-be generic competitor to abandon its patent challenge and refrain from offering its generic drug product for a number of years. In its landmark 2013 decision, Federal Trade Commission v Actavis Inc, which stemmed from the FTC’s pay-for-delay case against several pharmaceutical manufacturers, the US Supreme Court held that reverse-payment patent settlements are not immune from antitrust scrutiny and should be evaluated using traditional antitrust factors.

At issue in the underlying case are allegations by private plaintiffs that several generic pharmaceutical companies sought to challenge Warner Chilcott’s patent on oral contraceptive Loestrin 24 and sell generic versions of the drug, but they later agreed to drop their patent challenges in exchange for Warner Chilcott’s agreement to provide various non-cash forms of compensation. (Warner Chilcott was acquired in 2013 by Actavis, which now trades as Allergan (NYSE: AGN).