FTC files brief with appellate court urging reversal in pay-for-delay ruling in patent settlements between branded, generic drug manufacturers, says such deals are increasing, cost consumers billions of dollars a year

WASHINGTON , May 25, 2011 (press release) – The Federal Trade Commission filed an amicus brief before the U.S. Court of Appeals for the Third Circuit in support of private class action plaintiffs who have challenged the legality of patent settlements between branded and generic manufacturers of the high blood pressure medication K-Dur 20.

The FTC’s brief urges the Third Circuit to reverse the ruling of the lower court, which held that settlements between the patent holder, Schering-Plough Corporation, and the alleged infringers, Upsher Smith and ESI, did not violate antitrust laws. The lower court granted the defendants’ motion for summary judgment.

The patent settlements at issue in the case included payments from Schering-Plough to Upsher Smith and ESI, and resulted in the delayed entry of a generic alternative to K-Dur 20, a type of agreement sometimes called a “pay-for-delay” settlement. In 2001, the FTC also sued Schering, alleging the settlements related to K-Dur 20 were anticompetitive and illegal.

In its amicus brief, the FTC states that the appellate court should reverse the district court’s ruling and remand it for reconsideration. The brief explains that the district court’s decision would allow branded companies to pay generic companies to stay out of the market until patent expiration. It argues that the district court’s approach conflicts not only with basic antitrust principles, but with patent law and the policies of the Hatch-Waxman Act, which Congress enacted to encourage competition by generic drug firms.

According to the brief, pay-for-delay deals are increasing and already cost consumers billions of dollars a year. The brief urges the Third Circuit to resolve the issue by holding that pay-for-delay settlements are presumptively illegal and that they will be condemned unless the companies can show that their agreements do not harm competition.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action.

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