Schering-Plough v. FTC and the Future of Out-of-Court Settlements of Patent Challenges
For July’s main-page post, I’m pleased to offer an editorial from a guest writer, Mr. Gregory Glass, editor and principle contributor and analyst for the Paragraph Four Report. Mr. Glass, by virtue of his post-graduate training in both law and business as well as his extensive experience working in and for the pharmaceutical industry, is uniquely qualified to provide insights into this precedent-setting legal case and its implications for future settlements of Paragraph Four challenges to innovator-product patents.
FJC
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As many had predicted, on June 26, 2006 the US Supreme Court denied the FTC’s Petition for a Writ of Certiorari when it attempted to appeal the decision of FTC vs. Schering-Plough. As you might know, the 11th Circuit Court of Appeals ruled against FTC when it tried to challenge two settlements involving K-Dur®. In short, the FTC took the position that settlement of a challenge to an innovator brand’s patents (i.e. a Paragraph IV challenge) which includes payment to the generic company along with a possible delay in generic product market entry violates antitrust law.
The Court of Appeals for the 11th Circuit rejected this position and chided the FTC, pointing out that the law should favor settlements and should consider the strength of the patents challenged. In addition, the Court reminded the FTC that there are many reasons why parties settle cases, including spent emotions, and, therefore, that the context of the settlement is an important consideration. FTC attempted to appeal the decision to the Supreme Court. These types of appeals are not a “right” but are discretionary, so the Supreme Court decided not to hear the case, allowing the 11th Circuit decision to stand.
What the Supreme Court decision might mean for pending patent-challenge cases
In 2002, the FTC issued a Report, which studied Paragraph IV cases. The FTC noted that about 40% of these cases were settled, and that many of the settlements were arguably suspect. One recommendation of the Study was that the FTC should review and scrutinize all of the pending settlements. As one might imagine, this report—and the subsequent requirement that settlements pass FTC muster—led to fewer settlements of patent cases. According to ParagraphFour.com, the percentage of cases that settled declined to about 20%. So, parties were willing to proceed with the court case and forego settlement as they had in the past.
However, after the 11th Circuit issued its initial opinion of Schering-Plough v. FTC in March 2005, settlements seem to have increased again. While it may be too early to call an increase in settlements since March 2005 a “trend,” several high-profile patent challenges have resulted in settlements, including Plavix®(clopidogrel), Effexor XR®(venlafaxine), and Provigil®(modafanil). So, what does the Supreme Court action suggest for pending cases? Well, it suggests that if there is a trend towards settlements, it will continue, as the affected parties view the Supreme Court indifference as a green light to settle.
However, before we walk away satisfied with this conclusion, we must factor in the antitrust lawyers and their partners, the class action lawyers. Two days after the announcement of the Plavix settlement, the parties involved (Sanofi-Aventis and Apotex) were sued by The Kroger Co. (a supermarket chain) on antitrust grounds. This was followed by at least ten lawsuits trying to block the settlement on the grounds that “Apotex would have won its case.”
The legitimacy of these suits are questionable on many different grounds, such as: How do the plaintiffs know Apotex would have won its patent challenge? and How do the plaintiffs know that Apotex could supply the generic drug, when it would have done so, and at what price? and When would other generics appear on the market?”
While we can wonder about how strong these settlement-challenge cases are—remember, the law encourages settlements—they serve as a reminder that interested parties will use all available legal means to redress what they perceive as high prices for brand drugs.
October 16th, 2006 at 4:27 pm
[...] Drug makers continue to battle in Court for the rights to sell (Apotex) or prevent the sale (BMS, Sanofi-Aventis) of a generic version of the blockbuster blood-thinner Plavix. Meanwhile, the FTC vows to keep fighting the kind of settlement deals BMS and Apotex tried to reach before a group of state Attorneys General gave it the thumbs-down and despite FTC’s highly publicized failure earlier this year to derail a settlement between Schering-Plough and two generics manufacturers. [...]