FTC Files Amicus Brief Over Pay-To-Delay Generics

The Federal Trade Commission (FTC) filed an amicus brief in the U.S. District Court for the District of New Jersey requesting the court to consider the economic realities of no-authorized generic (no-AG) commitments and their impact on consumers when it addresses an antitrust challenge currently before it (see In re: Lamictal Direct Purchaser Antitrust Litigation). The FTC noted that Third Circuit recently held that a court considering an antitrust challenge to a Hatch-Waxman patent settlement “must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable  restraint of trade (see In re K-Dur Antitrust Litigation, 686 F.3d 197, 3d Cir. 2012).

No-AG Agreements

As part of the patent litigation settlement, in a no-AG agreement, the branded drug company agrees that it will not launch its own generic alternative when the first generic begins to compete. The FTC explained in its news release that “the introduction of the branded AG would cut into the revenues of a competing generic product.” The FTC has concluded that a no-AG commitment is legally sufficient to trigger a rebuttable presumption of illegality under the Third Circuit’s law because “a no-AG commitment can induce the generic firm to delay entry of its product to the market.”

 Lamictal Litigation

In the case before the New Jersey district court, private plaintiffs alleged that GlaxoSmithKline (GSK), a branded drug firm, paid Teva Pharmaceuticals to delay entry by promising not to complete with authorized generic versions of the drug Lamictal. The court must determine whether the no-AG commitment in this case qualifies as a reverse payment triggering a rebuttable presumption of illegality. GSK contends that no-AG commitments can be paid under K-Dur instead, GSK claims that Teva received nothing more than the ability to market it s generic product based on a negotiated entry date, a type of settlement permitted under K-Dur; and (2) exclusive licenses are not subject to antitrust scrutiny.

Amicus Brief

In its amicus brief, FTC argues that GSK’s claims are incorrect. First, FTC explains that Teva received more than the right to enter on a negotiated entry date, it also received commitments that GSK would not market AG versions of the two Lamictal products, thus guaranteeing that Teva would be protected from generic competition on each of its generic Lamictal products for at least six months. FTC contends that such commitments are often quite lucrative to the generic and argues that “it is logical to conclude that each of these could have acted as the quid pro quo for Teva to accept a later entry date.” Second, FTC contends that exclusive patent licenses may be procompetitive but are not immune from antitrust scrutiny as they may be an instrument by which an unlawful restraint of trade or a monopoly is created. Further, FTC contends that GSK’s arguments rely on superficial labels rather than the substance of the agreements at issue.

In addition to its arguments in response to GSK’s claims about the no-AG agreements, FTC included data from a comprehensive empirical study it conducted at the request of Congress on the effects of AGs on branded drug firms, generic drug firms, and consumers. According to the FTC, the empirical evidence concludes that a no-AG commitment is undoubtedly a payment providing a convenient method for a branded drug firm to pay generic patent challengers for agreeing to delay entry. In addition, FTC presented data it collected over an eight-year period that indicated that treating no-AG commitments as payments will not prevent all patent settlements.