Merck Seeks Supreme Court Review Of Decision on Reverse Payment Settlements

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A branded drug manufacturer Aug. 24 asked the U.S. Supreme Court to review what some experts have called a “landmark” decision holding that reverse payment settlements between branded and generic drug companies are presumptively unlawful restraints of trade (Merck & Co. v. Louisiana Wholesale Drug Co. , U.S., No. 12-245, petition for review filed 8/24/12).

The underlying decision by the U.S. Court of Appeals for the Third Circuit, issued in July, adopted the Federal Trade Commission's view that pay-for-delay, or reverse payment, settlements are anti-competitive (136 HCDR, 7/17/12).

Reverse payment settlements generally involve payments from companies that hold patents on brand-name drugs to settle patent infringement litigation brought by or against generic drug companies. They have the effect of delaying competition among brand-name and generic manufacturers in the pharmaceuticals market.


 

Merck says the case “presents one of the most significant unresolved legal questions currently affecting the pharmaceutical industry”: the appropriate antitrust standard for evaluating settlements of patent litigation where the settlement includes a payment from a branded to a generic company.  

 


Legal experts have predicted that the court will grant the petitioner's request for a writ of certiorari because the Third Circuit's decision conflicts with holdings from the Second, Eleventh, and Federal circuits.

Dramatic Departure.

The case, according to petitioner Merck & Co., “presents one of the most significant unresolved legal questions currently affecting the pharmaceutical industry: what is the appropriate antitrust standard for evaluating settlements of patent litigation between brand manufacturers and generic manufacturers, where the settlement includes a payment from the brand manufacturer to the generic manufacturer.”

In its petition, Merck said the Third Circuit's decision “dramatically departs from the prevailing view” on reverse payment settlements. For more than a decade, it said, courts consistently have held that the federal antitrust laws generally permit a settlement that includes a payment from a brand-name drug company to a generic manufacturer, so long as the settlement does not preclude competition beyond the scope of the patent.

Even the settlement at issue here, Merck pointed out, was upheld by the U.S. Court of Appeals for the Eleventh Circuit in Schering-Plough v. FTC, 402 F.3d 1056 (11th Cir. 2005), review denied, 548 U.S. 919 (2006).

Merck argued that high court review is needed “to dispel the uncertainty concerning the validity of pharmaceutical patent settlements” following the Third Circuit's decision.

Moreover, it said, the case “involves a question of universally acknowledged importance.”

Decision Clearing Settlement Reversed.

The Third Circuit reversed a decision by the U.S. District Court for the District of New Jersey in a case involving the high blood pressure drug K-Dur 20, and found that a reverse payment from a branded drug manufacturer to a generic competitor is a per se violation of antitrust law.

The appeals court's decision reinstated a class action lawsuit brought by private party direct purchasers against Schering-Plough Corp. (now part of petitioner Merck), and the generic drug companies Upsher-Smith and ESI, over the companies' patent settlements for K-Dur 20.

Kannon K. Shanmugam, Adam L. Perlman, C.J. Mahoney, and James M. McDonald, of Williams & Connolly LLP, Washington; Charles A. Loughlin, of Baker Botts LLP, Washington; John W. Nields Jr., Alan M. Wiseman, Thomas A. Isaacson, and Ashley E. Bass, of Covington & Burling LLP, Washington; and William J. O'Shaughnessey, of McCarter & English LLP, Newark, N.J., filed the petition on Merck's behalf.

By Mary Anne Pazanowski  


Full text of Merck's petition for review is at http://op.bna.com/hl.nsf/r?Open=mapi-8xlpzq.