Reverse Payments to Genric Drug Manufacturers OK'd

In Schering-Plough Corp. v. F.T.C., (11th Cir.; March 8, 2005), the court reversed the Federal Trade Commission’s "reverse payments" ruling:

Simply because a brand-name pharmaceutical company holding a patent paid its
generic competitor money cannot be the sole basis for a violation of antitrust
law. This alone underscores the need to evaluate the strength of the patent. Our
conclusion, to a degree, and we hope that the FTC is mindful of this, reflects
policy. Given the costs of lawsuits to the parties, the public problems
associated with overcrowded court dockets, and the correlative public and
private benefits of settlements, we fear and reject a rule of law that would
automatically invalidate any agreement where a patent-holding pharmaceutical
manufacturer settles an infringement case by negotiating the generic’s entry
date, and, in an ancillary transaction, pays for other products licensed by the
generic. Such a result does not represent the confluence of patent and antitrust
law. Therefore, this Court grants the petition for review. Accordingly, we SET
ASIDE the decision of the Federal Trade Commission and VACATE its cease and
desist order.

Schering-Plough holds a formulation patent for K-DUR, which gives the company the right to exclude infringing products into 2006. In 1995, Upsher- Smith and ESI Lederle filed separate Abbreviated New Drug Applications (ANDA) with the U.S. Food and Drug Administration (FDA) seeking to market generic versions of K-DUR. Schering-Plough brought separate actions against both companies alleging that their products infringed Schering-Plough's patent. In each case, Schering-Plough and the parties settled before trial. Under the settlements, licenses were agreed to allowing Upsher-Smith to bring its product to market in September 2001 and ESI Lederle to bring its product to market in January 2004.

The FTC Bureau of Competition in March 2001 filed a complaint in Washington, D.C. before an FTC administrative law judge charging that the patent litigation settlements involving K-DUR were anti-competitive and violated the Federal Trade Commission Act.

Schering-Plough was reported to be pleased with the ruling.