Lipitor Decision Threatens Patent Settlements: WLF
A Washington Legal Foundation (WLF) Legal Pulse column written by WLF chief counsel Richard Samp says an 8/21/17 Third Circuit Court of Appeals decision in a case involving Pfizer’s Lipitor may make it “virtually impossible for drug companies to settle patent infringement litigation,” if it is allowed to stand. Samp writes that while the Supreme Court’s 2013 decision in FTC v. Actavis held that so-called reverse payment settlement agreements are subject to antitrust scrutiny under certain specified circumstances, the Third Circuit stretched the holding “far beyond anything intended by the Supreme Court.”
The Supreme Court, according to Samp, held that drug patent litigation settlements are subject to antitrust scrutiny when they involve “unusual” settlement terms. The court said that a large cash payment from the patent holder to the alleged infringer qualifies as an unusual settlement term, Samp writes.
“The Third Circuit appears not to have received the Actavis message,” Samp writes. “It’s Lipitor decision endorses antitrust scrutiny of virtually any benefit conferred on a generic in connection with a drug patent settlement.”
The case involves Ranbaxy’s challenge to several Lipitor patents. As part of a 2008 settlement of numerous pending infringement lawsuits, Ranbaxy agreed not to market a generic Lipitor until 2011. In return, Pfizer agreed to drop its damages claim against Ranbaxy for alleged infringement of a patent covering Pfizer’s Accupril, in return for a $1 million payment from Ranbaxy.
A New Jersey federal court dismissed antitrust claims against the two companies, saying that the settlement did not include any of the “unusual” settlement terms identified by the Supreme Court in Actavis. But the Third Circuit reversed that ruling, holding that virtually any drug patent settlement should be subject to antitrust scrutiny. Samp says the court noted allegations that Pfizer’s damage claims in the Accupril litigation were worth millions of dollars and said, “If parties could shield their settlements from antitrust review by simply including a token payment by the purportedly infringing generic manufacturer, then otherwise unlawful reverse payment settlement agreements attempting to eliminate the risk of competition would escape review.”
According to Samp, if a patent holder cannot transfer anything of “considerable value” to a generic drug company without facing antitrust scrutiny, and if there are no potential damages that a patent holder could offer to forgo, there may never again be a settlement of any drug patent litigation because a patent holder will be unable to offer lawful settlement terms that a generic drug company would find sufficiently attractive to induce it to abandon the huge financial rewards that Hatch-Waxman offers to drug patent challengers. “The Supreme Court ought to overturn the Third Circuit’s Lipitor decision and restore the proper balance between federal antitrust and patent-law policy,” the article concludes.