The Solicitor General's recent recommendation to deny certiorari in FTC v. Schering seems to raise the likelihood that the Supreme Court will decline to hear the case. If the Supreme Court denies cert, perhaps Congress should consider the policy issues at play.
In FTC v. Schering, the FTC is appealing an Eleventh Circuit decision vacating the FTC's ruling that a settlement of Hatch-Waxman litigation including substantial "reverse payments" from Schering-Plough to two generic challengers violated the unfair competition laws. The Solicitor General's brief is one of several amicus briefs filed with the Court in the case.
The various briefs reveal two competing views of reverse payment settlements:
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reverse payments that delay generic market entry for an amount of time greater than the delay would have been in the absence of a payment violate the antitrust laws; and
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so long as the exclusionary effects of a settlement agreement do not extend beyond the patent expiration date, the agreement comports with the antitrust laws.
The FTC and consumer advocate groups tend to hold the first view, while the courts have generally adopted the second. These competing views highlight the tension between the patent laws (which reward innovation by granting an exclusionary right for a fixed term), the antitrust laws (which prohibit parties with market power from allocating markets among their competitors), and the Hatch-Waxman Amendments (which seek to promote generic drug market entry while rewarding innovation by branded drug makers).
For those groups holding the first view, the public policy goal of bringing generic drugs to consumers at the earliest possible date trumps the other competing issues. While these groups see reverse payments as particularly egregious, their real issue is that any settlement in which generic entry is potentially delayed is harmful to consumers and should be considered a violation of the antitrust laws. One problem with this view is that it conflicts with the policy of encouraging settlements of lawsuits; another is that the courts haven’t bought into it.
A branded drug maker is currently entitled, under Hatch-Waxman, to a 30 month stay upon timely filing suit against an ANDA applicant who files a paragraph IV certification. Accordingly, the FTC and consumer advocate groups would seem most concerned by settlement agreements that extend a branded drug maker's exclusivity beyond the 30 month stay.
One way to reduce incentives for settlements that delay generic market entry beyond the 30 month stay is to require the first ANDA applicant who files a paragraph IV certification ("first filer") to forego all or part of its 180-day exclusivity rights if it enters into such a settlement agreement. Moreover, all or part of the exclusivity rights would transfer from the first filer to the second ANDA filer. Assuming the second ANDA has been approved by the FDA, the second filer could begin marketing its generic drug. If the branded drug maker settles with the second filer, the exclusivity would then pass to the third filer--and so on.
The purpose of the 180-day exclusivity for first filers is, after all, to encourage generic drug companies to challenge weak patents on brand name drugs. If the generic drug company drops its patent challenge in a settlement agreement, it should lose the exclusivity. Transferring the 180-day exclusivity to subsequent filers encourages multiple ANDA filings and multiple patent challenges for drugs protected by patents perceived to be weak, which should ultimately bring generic drugs to market sooner.
Comments on the proposal described above are welcome--and encouraged.
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