The U.S. Supreme Court gave something to both sides in a closely watched dispute over so-called "pay-for-delay" agreements between brand-name and generic drug manufacturers that put off the production of generics in return payments by brand-name patent holders.
By a 5-3 vote, the court in Federal Trade Commission v. Actavis held that such deals are not presumptively illegal under antitrust laws, but it said the government should be able to make a case that individual settlements are anticompetitive, under a "rule of reason" standard.
Justice Stephen Breyer, probably the court's prime antitrust expert, wrote for the majority that the "risk of significant anticompetitive effects" flowing from reverse payments outweigh the desirability of the settlements between drug makers.
The ruling came at the intersection between patent and antitrust law, made contentious by the inherent conflict between the monopoly that is granted by patents but frowned on by antitrust laws.
"In practical terms, I think the middle ground struck by the Supreme Court will result in continued litigation on the subject and continued attacks by the FTC," said former FTC lawyer Lesli Esposito, now a litigation partner at DLA Piper.
Other antitrust and patent experts said the ruling may have introduced enough uncertainty about the success of "pay-for-delay" agreements if challenged that they will become scarcer or more expensive to negotiate.
For that reason, consumer advocates who viewed the deals as a way of keeping drug prices high applauded the ruling.
"I am pleased that the Court today recognized that antitrust policies play an important role in protecting consumers even when patents are at issue," said Senate Judiciary Chairman Patrick Leahy (D-Vt.), who has held hearings on the issue. "Today’s decision should caution drug companies against making payments to delay competition and harm consumers."
New York Attorney General Eric Schneiderman, who filed a brief supporting the Federal Trade Commission's challenge to the settlements, called the ruling "a victory for millions of Americans who depend on generic drugs to treat illness and pain." Edith Ramirez, the FTC chairwoman, called the high court ruling a "significant victory" for American consumers.
Rutgers University School of Law-Camden professor Michael Carrier, an antitrust and patent expert, said Monday that the ruling "is a loss for the drug makers who were hoping the court would have slammed the door once and for all on these agreements. That didn't happen. So I think the FTC came out on top."
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