Number of pay-for-delay deals remains low, says FTC
The number of potentially anticompetitive patent infringement settlements between brand drugmakers and generic competitors remained low in 2017, according to the Federal Trade Commission (FTC).
In a staff report shared on Thursday, December 3, the FTC noted that despite the total number of Hatch-Waxman patent settlements entered by pharmaceutical companies in 2017 was close to the record high of 2016, the number involving reverse payments that are likely to be anticompetitive was “very low”.
This is the FTC’s fourth annual snapshot of Hatch-Waxman patent settlements since FTC v Actavis (2013), in which the US Supreme Court held that a branded drug manufacturer’s reverse payment to a generic competitor to settle patent litigation can violate the antitrust laws.
In 2016, the number of ‘pay-for-delay’ settlements more than doubled on the previous year to reach 30.
The following year, in 17 of the 20 final settlements contained explicit compensation to the generic maker and a restriction on selling a generic for a period of time, the only explicit compensation was $7 million or less in litigation fees. In Actavis, the court concluded that avoided litigation expenses might constitute a justified payment.
And, for the first time since 2004, no settlement agreement 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.
In 2017, a total of 226 final patent settlements were filed with the FTC and the Department of Justice.
The number of agreements with “possible compensation” to the generic maker (provisions that might act as compensation, but would require inquiry into specific marketplace circumstances) decreased from 14 in 2016 to 11 in 2017.
The report added that, in 78% of final settlements, the generic company received rights not only to the patents-at-issue in the litigation but also to licences or covenants not to sue for patents that the brand controls at any time after the settlement that might cover the generic product.
FTC chairman Joe Simons said: “The report shows, following the Actavis decision and subsequent case law applying it, a continued decline in use of the types of reverse-payment agreements that are most likely to harm consumers.
“FTC staff will continue to be vigilant in its review of each patent settlement that it receives and will closely scrutinise provisions that may be anticompetitive.”
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