Little Guidance For Lower Courts In FTC v. Actavis

In June, the U.S. Supreme Court issued its opinion in FTC v. Actavis, Inc., a decision that will have significant ramifications for the pharmaceutical industry. It will embolden the FTC and class action attorneys to bring challenges to settlements of patent infringement litigations. By encouraging continued litigation the case could not only impact the availability of new drugs but also could delay the entry of generics.

The FTC challenged as anti-competitive under the antitrust laws settlements that brand-name and generic drug companies execute to end patent litigation when those settlements contain a cash payment from the brand to the generic companies.

The FTC’s complaint in Actavis asserted that the brand and generic companies violated antitrust laws when the brand company allegedly paid cash in exchange for an agreement to abandon challenges to the brand’s patent, and to refrain from marketing a generic version of AndroGel until 2015.

The Supreme Court, in a 5-3 vote, opted for a middle ground: the “rule of reason” standard used for most antitrust cases.
According to the authors, the decision will have unintended, consequences for both pharmaceutical companies and consumers. It will discourage settlement of patent litigation because after settling, the parties would have to litigate the question of patent validity as part of a defense against an antitrust suit. It likely will delay the entry of generics by reducing the incentive to challenge brand patents and discourage investments in innovation.