Reprinted from DRUG BENEFIT NEWS, biweekly news, proven cost management strategies and unique data for health plans, PBMs, pharma companies and employers.
By Angela Maas, Managing Editor
June 21, 2013 Volume 14 Issue 12
The U.S. Supreme Court finally made a decision on so-called “pay-for-delay” deals, but it seems to be more anticlimactic than the definitive decision many had expected. This, in turn, has led to opposing views as to whether payers and consumers will benefit from the ruling in terms of lower prices from more generic competition or whether the decision will stifle competition and actually increase manufacturers’ costs — costs that will be passed along to payers and consumers.
On June 17, the Supreme Court ruled in the case between the Federal Trade Commission (FTC) and Actavis, Inc. The lawsuit was spurred by activity that started in 2003, when Watson Pharmaceuticals, which is now known as Actavis, filed an Abbreviated New Drug Approval for AndroGel and then was sued for patent infringement by the testosterone gel’s manufacturer, Solvay Pharmaceuticals. The companies reached a settlement that included Solvay paying Actavis millions of dollars a year to keep its generic competitor off the U.S. market. In turn, Actavis’ product could come onto the market about five years before AndroGel’s patent expired.
The FTC filed suit in 2009, claiming that such arrangements, also known as reverse payment deals, violated part of the Federal Trade Commission Act. The district court dismissed the case, a decision affirmed by the U.S. Court of Appeals for the Eleventh Circuit last year.
By a vote of 5-3 — with Justice Samuel Alito recused from the case — the Supreme Court reversed the Eleventh Circuit’s decision. The court ruled that the FTC can continue with its case and try to prove that such deals are a violation of antitrust laws. However, the court did not declare pay-for-delay deals presumptively unlawful as the FTC had hoped it would, leaving it up to lower courts to decide cases based on the “rule of reason.” According to Jeffrey W. Brennan, an antitrust partner at McDermott Will & Emery LLP, “This leaves the burden on the FTC to prove an anticompetitive effect.”
In addition, the court rejected the defendant’s argument that such deals fall within a patent’s exclusionary power — the so-called “scope of the patent” rule. “Had the Court upheld the ‘scope of the patent test’ applied by the lower court, then only a rare and very narrow category of ‘pay-for-delay’ settlements would have been subject to FTC challenge in the future,” explains Brennan, who previously was head of the FTC’s Health Care Services and Products Division and associate director of the FTC’s Bureau of Competition.
“The Supreme Court has torn a huge hole in the venerable scope of the patent” rule, contended Eamon O’Kelly, a partner in the Antitrust & Competition Law practice for Arent Fox LLP, during a June 18 conference call on the ruling.
“The Supreme Court didn’t grant the wishes of either side,” noted O’Kelly. Furthermore, the decision did not provide “much guidance as far as what courts should do” with reverse-payment cases, offering only five sets of considerations for the court’s ruling that O’Kelly termed “rather vague.” Among these were that “the specific restraint at issue has the ‘potential for genuine adverse effects on competition’” and that “these anticompetitive consequences will at least sometimes prove unjustified. There may be justifications for reverse payment that are not the result of having sought or brought about anticompetitive consequences, but that does not justify dismissing the FTC’s complaint without examining the potential justifications,” according to the court.
Ultimately, he explained, the court will “leave it up to the lower courts to figure out how to apply the rule of reason.” This could lead to “conflicting opinions as to how to apply it,” contended Janine Carlan, another partner at Arent Fox and a Hatch-Waxman patent litigator, during the conference call.
With so much uncertainty as to what is permitted, “there will most likely be fewer settlements” between brand drug and generics manufacturers, said Carlan.
Who Were Winners in Ruling?
In response to a question about who won in the ruling, O’Kelly said that “private plaintiffs and private plaintiffs’ counsel won a big victory.…Economists also are big victors,” he contended, because future cases will require “detailed economic analysis” to determine whether deals really will have an anticompetitive effect.
The decision was a “partial victory for the FTC, but they didn’t get what they had been fighting for 15 years.”
“No other decision this term will have as much impact on consumers’ pocketbooks,” maintains antitrust attorney David Balto.
The former policy director of the FTC, Balto points out that “all pharmaceutical companies will have to carefully review how they settle patent litigation. Settlements are clearly not illegal; it’s the side arrangements that delay generic competition that have been struck down by the court.”
He tells DBN that the decision will have a “positive” impact on consumers because it “is going to increase the incentives for…generic firms to enter the market as soon as possible.” And “to the extent that this leads to greater competition, that will be a positive” for health plans and PBMs as well, Balto says.
“On the whole, the ruling is a good one for consumers and should help our efforts to keep drug costs affordable in the long term,” Peter Wickersham, senior vice president, cost of care for Prime Therapeutics LLC, tells DBN. “The FTC should be looking at any deal that delays the entry of a new generic with a careful eye. While some may be concerned that this ruling may have a chilling effect on the challenging of patents by generic manufacturers, the ability to challenge individual instances on antitrust grounds should be allowed in our view. There will continue to be increased scrutiny of these so-called ‘pay-for-delay’ agreements. We will certainly be watching how this develops over the next few years and paying close attention to whether there is any impact on the availability of generics.”
“I’d be a lot slower to declare consumers the victors,” said O’Kelly, for a couple of reasons. First, moving forward there will be “a lot less of these settlements, some of which would have allowed generic entry before [brand] patents had expired.” This means it “is certainly a possibility” that the decision will delay generic drugs’ entry onto the marketplace, Carlan said.
In addition, because there likely will be fewer settlements, cases will be “litigated to a verdict,” and there will be “very serious costs with litigating antitrust suits that come out of these settlements,” O’Kelly said. There is also the “risk of damages” for manufacturers, and “all of these costs will be passed onto the consumer,” said O’Kelly.
“If I were a consumer, I would be cautious before I popped the champagne cork.”
But, says Balto, “The vast majority of cases are settled without raising any kind of antitrust concerns, and that will continue to be the case even after this” ruling. “I don’t think it will have that significant of an impact.”
According to Brennan, “The industry contends that a restriction on such payments would lead to fewer settlements, thereby reducing the number of generics that enter prior to patent expiration, and will create a disincentive for generics to file applications to market with the FDA, because they will anticipate longer and costlier hold up in litigation. Time will tell which side, or if either side, is correct…although it is more certain that antitrust challenges to settlements will in general take longer and be costlier, in light of the rule of reason standard that will be applied.”
What’s the Future of Proposed Legislation?
In February, Sens. Amy Klobuchar (D-Minn.) and Charles Grassley (R-Iowa) introduced S.214, the Preserve Access to Affordable Generics Act. The bill seeks to prohibit brand drug manufacturers from entering into reverse-payment deals with generic companies. The bill — which has seen various incarnations introduced but never passed in previous congressional sessions — was referred to the Senate Judiciary Committee.
So what happens to that legislation now?
Wayne Matelski, a partner at Arent Fox who leads its Food and Drug practice, said during the June 18 conference call that he “think[s] Congress will not bother with a legislative fix now.”
“My guess, and it is only a guess, is that yesterday’s decision will temper any momentum that exists — if it exists — for legislation, and that the consensus will be to let the courts address the issue in a case-by-case manner,” says Brennan.
However, says Balto, “It would be a mistake for Congress to think this decision resolves pay for delay.” He points out that such deals do not “occur in any other industry” and asserts that “flaws in the Hatch-Waxman Act” make pay for delay possible. “There is still a compelling need for Congress to amend the Hatch-Waxman Act.”
Will FTC Challenge Prior Settlements?
As far as next steps for the FTC, “I suppose it is possible” that the agency will go back and challenge a settlement that it had not previously challenged, said O’Kelly, as long as it is within the four-year statute of limitations. Such cases “could in theory be fair game for challenge now.” He added, though, that “any case where a settlement is seen as vulnerable to an antitrust attack” most likely has been challenged already by private parties.
“Right now, the FTC has two cases in litigation: FTC v. Actavis, which the Court just remanded to the lower court, and FTC v. Cephalon, which the Third Circuit Court of Appeals stayed pending the Court’s decision yesterday,” explains Brennan. “The FTC is resource-limited, so it is likely that a high percentage of the resources it devotes to ‘pay-for-delay’ matters will be applied to those two cases and to matters it is currently investigating. This is particularly likely since it must prove its case under the rule of reason, without the benefit of an easier ‘presumptive illegality’ standard. Although it is possible that it will go back and challenge an ‘old’ settlement, it is probable that it will not (or if it does, limit to one case or two at the most). If they do challenge an ‘old’ settlement, it would likely be one involving a generic that has not launched yet.”
And as for pay-for-delay deals themselves, their future remains up in the air as well. With the Supreme Court not providing guidance on how lower courts should rule, “you’re going to see district courts disagreeing with other district courts and circuit courts disagreeing with other circuit courts,” said Matelski. “There is no certainty” as far as how courts will rule.
“I suspect this may be up before the Supreme Court again,” he added. “You never know.”
http://aishealth.com/archive/ndbn062113-02
No comments:
Post a Comment