‘Considerable increase’ in pay-for-delay settlements: FTC report
The number of ‘pay-for-delay’ patent settlements reached in fiscal year (FY) 2016 represented a “considerable increase” from the previous year, according to a Federal Trade Commission (FTC) report released yesterday, May 23, though there has been a considerable reduction in the most problematic settlements since 2013.
In 2013, in Federal Trade Commission v Actavis, the Supreme Court said that instances where a branded drug manufacturer pays a generic competitor to settle patent litigation could potentially violate anti-competition law, and that regulators should be free to challenge such agreements.
In FY2012, the fiscal year before the 2013 ruling, there were 40 such settlements, but this dropped to 29 the year after the Actavis decision. It further decreased to 21 in FY2014, and 14 in FY2015.
However, in FY2016, the number of ‘pay-for-delay’ settlements more than doubled to reach 30, according to the FTC’s latest report.
Only one agreement during the year contained a ‘no authorised generic’ commitment—a promise not to market an authorised generic product—which was the type of reverse payment at issue in the Actavis case.
The FTC said that this was the lowest number of ‘no authorised generic’ agreements reached annually since FY2004. Five such agreements were reached in FY2015 and eleven in FY2014. In the fiscal year before Actavis, 33 ‘no authorised generic’ settlements were recorded.
The FTC’s report also found that, in most (82%) of the 232 final patent settlements filed with the FTC and Department of Justice during FY 2016, the generic company in the dispute received the rights to use the patents at issue in the litigation.
In these cases, the generic company also received rights to licences or covenants not to sue for all patents that the brand owns that might cover the generic product at any time after the settlement.
Joe Simons, chairman of the FTC, said: “The data are clear: the Supreme Court’s Actavis decision has significantly reduced the kinds of reverse payment agreements that are most likely to impede generic entry and harm consumers.”
“These annual reports are an important tool to monitor how patent settlement agreements continue to evolve, and to identify provisions that might be anticompetitive,” he added.
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