Uncertainty Still Prevails re Reverse Payment Settlement Agreements between Branded and Generic Pharmaceutical Companies Yesterday, the

Supreme Court held in Federal Trade Commission v. Actavis, Inc., et al. that government and private entities may challenge on antitrust grounds "reverse payment" settlement agreements arising from Paragraph IV litigation (ANDA Litigation) under the Hatch-Waxman Act, which has a procompetitive thrust. The case was an antitrust challenge by the Federal Trade Commission (FTC) to a "pay for delay" or "reverse payment" agreement between a brand-name drug company and generic drug manufacturers who were paid millions of dollars to delay generic entry into the market for over 5 years. Because generics reduce drugs prices after market launch, the FTC sued the drug companies for allegedly delaying price competition and increasing drug costs in the interim. The Supreme Court held that "reverse payment" settlement agreements may violate antitrust laws. However, the Court specifically declined to say that such agreements are presumptively unlawful, and said that courts reviewing such agreements should apply a "rule of reason" analysis by considering traditional antitrust factors. The Supreme Court's decision may create uncertainty in the drug industry. One potential effect is discouraging settlements between brand-name drug companies and their generic competitors because the legality of settlement agreements might be in question. Companies may be forced to fully litigate patent disputes rather than settle. Full litigation can result in substantial costs for both brand-name and generic companies, create business uncertainty and result in delayed availability of generic drugs. Those companies already with "reverse payment" settlement agreements in place may be forced to defend the legitimacy of settlement deals in court if challenged by antitrust enforcers, or even perhaps certain private parties (e.g., wholesalers, retailers or insurers). On-going challenges to these settlement agreements are likely in

the lower courts. Such cases may determine whether the reverse payment settlement agreement will be a thing of the past or not. If you have any questions or comments regarding this news brief, please contact the authors, James Kozuch, Robert Stevenson and Francine Li.

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