Pharmaceutical Manufacturers Hope for a “Lamb” Conclusion to March

On March 19, 2013, the U.S. Supreme Court will hear oral arguments in Mutual Pharmaceutical Company v Bartlett on whether a generic drug manufacturer can be held responsible for injuries alleged to have been caused by the generic drug formulation. The Court’s eventual decision will likely further clarify the legal recourse of patients injured from consuming generic drugs. The First Circuit appellate court had previously ruled that the generic drug manufacturer was responsible for injuries suffered by a patient after taking one of its products.

Preemption and Plaintiff Recourse

Two years ago, the Supreme Court had severely limited the conditions under which consumers of generic drugs could sue the generic drug manufacturers, ruling in Pliva v. Mensing that generics did not have control over what warning labels said and therefore could not be sued for not alerting patients to the risks of taking their drugs.

Under federal law, generic companies are not allowed to deviate from the brand-name drug they are copying.

However, the matter before the Court this month took a different tack to the Pliva v. Mensing decision; the injured patient argued before the First Circuit that the drug itself was defective, not that the drug’s warning label was inadequate. The latter has been the approach of most of the litigation winding its way through the federal court system. The generic drug manufacturer argued that similar to a drug label, it had no control over the drug’s design.

If the Court decides in favor of the generic drug manufacturer, it will leave injured patients with even fewer options for recourse. Interestingly, the federal government sided with the generic manufacturers in this matter, even though it opposed the argument in Mensing, noting that permitting generic drug manufacturers to be sued for brand-name drug labeling or design defects would undermine the FDA’s authority.

Pay-for-Delay Settlements

This will mark the second matter before the Court in March that will have wide-ranging impact on the pharmaceutical industry. Oral arguments in the matter of Federal Trade Commission v. Actavis will be held on March 25, 2013. In a previous staff study, as well as a suit against drug manufacturers, the FTC says brand-name and generic drug manufacturers agree to “reverse payment” or “pay-to-delay” deals in violation of the Sherman Antitrust Act.

A  brand-name drug manufacturer receives approval from the FDA to sell a patented drug, for which the company gets market exclusivity until the patent expires, which lasts anywhere from 12 to 20 years. Such exclusivity is viewed as an incentive for the drug manufacturer to spend money on research and development of drugs, with the expectation that higher prices will be charged to recoup the research costs and generate profits. In turn, a generic drug manufacturer files for a drug application, claiming its version is close in safety and efficacy but does not copy the brand-name drug, which triggers a patent infringement suit by the brand-name manufacturer.

Although patent infringement matters can make it to trial, over the last decade more often than not, both the brand-name and generic drug parties enter into agreements that allow the generic company to sell its drug earlier than if it waited until the patent actually expired, but not as early as the generic drug manufacturer wanted.

According to the FTC, in fiscal year 2012 there were 40 such deals, involving 31 products whose sales totaled more than $8.3 billion.

But with the oral arguments on March 25, these brand-name and generic drug manufacturers will be opposing government officials who argue that prices for consumers would be even lower if those companies did not strike deals to restrain trade. Drugstore chains and health insurers have waded into the scrum and back the government’s arguments.