Avoiding Antitrust Issues - - BioPharm International


Avoiding Antitrust Issues

BioPharm International
Volume 1, Issue 8

NDA patent holders have complained vigorously that the FTC's aggressiveness has effectively prevented them from settling patent infringement suits against generic ANDAs, and has effectively held them hostage to generics. On March 8, 2005, the Eleventh Circuit Court of Appeals agreed and reversed an earlier FTC decision. In that decision, the FTC had found Schering-Plough Corporation liable under Section 5 of the FTC Act and Section 1 of the Sherman Act for making payments to Upsher-Smith Laboratories as part of a settlement involving K-Dur 20 (a supplement generally taken in conjunction with prescription medicines for the treatment of high blood pressure or congestive heart disease) in return for Upsher agreeing to license certain products to Schering and promising not to enter the K-Dur 20 market.37 The court rejected the FTC's finding that Schering's payments to Upsher and ESI Lederle, Inc. did not represent "legitimate consideration for the licenses granted by Upsher or ESI's ability to secure FDA approval of its generic." 38(p1062) Noting that "U.S. patent litigation costs [over] $1 billion annually," and that there "is no question that settlements provide a number of private and social benefits as opposed to the inveterate and costly effects of litigation," the court ruled that "[t]he Commission's inflexible compromise-without-payment theory neglects to understand that reverse payments are a natural by-product of the Hatch-Waxman process." The Eleventh Circuit added, "Consequently, the Commission prohibited settlements under which the generic receives anything of value and agrees to defer its own research, development, production, or sales activities."38(p1074)

The recent Schering decision may conflict with a 2003 ruling by the Sixth Circuit holding that quarterly $10 million payments by Hoechst Marion Roussel, the manufacturer of prescription drug Cardizem CD, to Andrx Pharmaceuticals to refrain from marketing a competitive generic drug violated the antitrust laws. Regarding In Re Cardizem CD Antitrust litigation, the court noted that Andrx's generic Cardizem CD had received FDA approval.39 In addition, in In Re Terazosin Hydrochloride Antitrust litigation, the court applied a per se analysis and found a settlement agreement to be illegal,40 following a remand from the Eleventh Circuit in Valley Drug Co. v Geneva Pharmaceuticals, Inc.41 Given the high stakes and continuing uncertainty, any settlements of generic drug patent litigation must be carefully reviewed by antitrust counsel and the court.

In Schering, the Eleventh Circuit was impressed by the "settlement [having been] signed in Judge Rueter's presence on January 23. 1998."38(p1061) By contrast, the FTC charged in Abbott Laboratories and Geneva Pharmaceuticals that "[t]he court hearing the patent litigation was not made aware of the respondents' Agreement."35(28)

Tying Arrangements

In certain circumstances, it may be illegal to tie the sale of a patented pharmaceutical to another product.42 For example, in 1992 the FTC charged that Sandoz Pharmaceuticals unlawfully required purchasers of its schizophrenia drug clozapine, the first new drug for the treatment of schizophrenia in twenty years, to also purchase distribution and patient-monitoring services from Sandoz. The FTC asserted that Sandoz's "'tying' arrangement raised the price of clozapine and prevented others — such as private laboratories, the Veterans Administration, and state and local hospitals — from providing the related blood tests and necessary patient monitoring."43

Antitrust Issues In Pharmaceutical Licensing Relationships

From a competition standpoint, biopharm licenses can be procompetitive and efficiency enhancing.44 An excellent example is "the successful collaboration between Genentech and IDEC pharmaceuticals that resulted in the drug Rituxan, the first monoclonal antibody granted market approval in the United States." 45(pp1,18)

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