Supreme Court Rules Drugmakers Can Be Sued For Pay-To-Delay Deals

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After years of anticipation and considerable debate, the US has ruled that can face lawsuits over so-called pay-to-delay patent settlements, but that such should not necessarily be assumed to be illegal.

In these deals, a brand-name drugmaker pays a settlement to a generic rival in exchange for ending patent litigation and launching a copycat medicine at a future date. Also known as reverse settlements, these emerged as an unintended consequence of the Hatch-Waxman Act that was passed nearly 30 years ago to accelerate access to lower-cost generics.

“This court declines to hold that reverse payment settlement agreements are presumptively unlawful. Courts reviewing such agreements should proceed by applying the ‘rule of reason,’ rather than under a ‘quick look’ approach,” Justice Stephen Breyer wrote in a 5-to-3 decision. “…The likelihood of a reverse payment bringing about anticompetitive effects depends upon its size, its scale in relation to the payor’s anticipated future litigation costs, its independence from other services for which it might represent payment and the lack of any other convincing justification” (here is the ruling).

The decision largely vindicates the position taken by the US Federal Trade Commission, which has maintained the deals are anti-competitive because generic drugmakers are given incentive to file lawsuits against brand-name rivals and then settle for a quick profit, rather than challenge a patent in court. The FTC argues consumers are prevented from obtaining lower-cost drugs sooner than they would otherwise and, consequently, this practice costs Americans about $ 3.5 billion annually (more here).

The pharmaceutical industry, however, argues these settlements actually speed lower-cost generics to pharmacy shelves and medicine…Read more

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