Pharma Can Pay for No Play, Supreme Court Says

March 07, 2011 – Without providing comment, the Supreme Court decided not to review a federal appeals court ruling that allows pharmaceutical companies to pay competitors to delay the production of generic drugs.

    By Todd Neale, Staff Writer, MedPage Today

March 07, 2011 – Without providing comment, the Supreme Court decided not to review a federal appeals court ruling that allows pharmaceutical companies to pay competitors to delay the production of generic drugs.

Last year, the New York-based appeals court dismissed a legal challenge to a 1997 deal in which Bayer AG paid Teva Pharmaceutical’s Barr Laboratories not to develop a generic version of the antibiotic ciprofloxacin, saying that such an action does not violate antitrust laws.

The legal challenge was raised by several pharmacy chains, including CVS and Rite Aid, which appealed the ruling to the Supreme Court.

The highest court’s decision not to review the case is the latest in a series of legal decisions since 1991, when Barr filed an abbreviated new drug application for a generic version of ciprofloxacin, which was patented by Bayer AG. The application said the patent was invalid and unenforceable.

Bayer sued but lost its motion for a summary judgment. Shortly before a trial was scheduled to begin, the two companies settled in 1997.

As part of the settlement, Bayer paid Barr nearly $400 million in exchange for Barr’s agreement not to bring out a generic version of ciprofloxacin until at least six months before the patent expired in 2003.

Such reverse exclusion payments have been challenged in court as violating antitrust laws. The ciprofloxacin case eventually made its way to the U.S. District Court of Appeals for the Second Circuit in New York.

That court, which had already ruled that exclusion payments were not necessarily illegal in a 2006 case involving tamoxifen, upheld the legality of the Bayer-Barr agreement.

The tamoxifen decision stated that exclusion payment settlements are legal unless the patent is “shown to have been procured by fraud, or a suit for its enforcement is objectively baseless.”

However, the appellate court encouraged the plaintiffs in the ciprofloxacin case to petition for a rehearing en banc, in which all of the judges, and not just a selected panel, would hear the case.

Last September, that petition was denied, leading to the failed attempt to get a review by the Supreme Court.

In her dissenting opinion, circuit court Judge Rosemary Pooler said the tamoxifen ruling that served as the basis for the ciprofloxacin ruling should be reexamined, and cited the impact of exclusion payment settlements on the public.

She noted that the Federal Trade Commission has identified 53 such patent settlements since the tamoxifen decision and estimated that the settlements cost consumers about $3.5 billion a year.

“Further, such settlements serve no obvious redeeming social purpose,” Pooler wrote. “Put simply, what the patent holder purchases by means of an exclusion payment settlement is the continuation of a patent the patent holder must have thought had some significant probability of being declared invalid.”

Pooler said that the exclusion payment settlements, although not explicitly permitted or prohibited by the Hatch-Waxman Act, are “plainly inconsistent” with the stated purpose of the act, which is to encourage patent challenges that increase consumers’ access to inexpensive drugs.

In a response to the Supreme Court’s decision not to review the case, Pharmaceutical Research and Manufacturers of America (PhRMA) executive vice president and general counsel Diane Bieri said in a statement that “law and public policy have always favored settlements, including patent settlements, which often allow generic options to reach patients prior to patent expiration.”

“The courts and enforcement agencies like the Federal Trade Commission are in the best position to review these settlements on a case-by-case basis to ensure that they are not harmful to competition,” she said.
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