One of the most controversial legal questions in the pharmaceutical industry today concerns settlements of patent infringement suits between branded and generic drug companies. These settlements, which are by-products of the Hatch-Waxman Act, involve payments from the branded manufacturer to the generic drug company in exchange for the generic company staying off the market for a period of time. For nearly a decade, courts considering this issue applied a scope of the patent test to determine the validity of these settlements. Over time, increasing deference was given to a presumption of patent validity, and almost all challenged settlements were deemed valid. In June 2012, the Third Circuit applied a quick look rule of reason test and found the settlement in question invalid. The Third Circuit’s departure from the prevailing approach taken by its sister circuits marked a shift towards stricter scrutiny and created a circuit split. After almost a decade of effort by the Federal Trade Commission to get this issue before the Supreme Court, certiorari was granted to a patent settlement case out of the Eleventh Circuit, Actavis. It was the Third Circuit’s decision in favor of the FTC’s position that clinched the effort this time. Following Actavis, reverse-payment settlements are not categorically immune from the antitrust laws even when within the scope of the patent. Lower courts must now weigh the settlement’s possible pro-competitive benefits against its potential anticompetitive effects. As a result, the doors have been reopened for pharmaceutical competition.
In re K-Dur Antitrust Litigation: Reopening the Door for Pharmaceutical Competition,
Nw. J. Tech. & Intell. Prop.