The Federal Trade Commission (FTC) has vowed to take aggressive action after the U.S. Supreme Court ruled favorably on agency’s right to challenge so-called pay-to-delay agreements. However, it is also calling on Congress to move forward with stronger laws prohibiting such settlements.
Pay-to-delay agreements are most common in the pharmaceutical industry where brand name drug makers agree to resolve patent infringement suits against generic drug makers by paying them large financial settlements to refrain from selling the competing drugs for a specified number of years. In Federal Trade Commission v. Actavis, Inc., the Supreme Court ruled that pay-to-delay agreements could violate anti-trust laws.
According to the Court, although the anticompetitive effects of the reverse settlement agreement might fall within the scope of the exclusionary potential of the patent, this does not immunize the agreement from antitrust attack. The justices further held that courts reviewing pay-to-delay agreements should proceed by applying the “rule of reason,” rather than under a “quick look” approach, which shifts the burden to the defendant to show empirical evidence of procompetitive effects.
Going forward, the FTC plans to use the precedent to aggressively attack settlements that its sees as anticompetitive, Chairwoman Edith Ramirez told a Senate subcommittee earlier this month. However, she also voiced support for proposed legislation that would formalize the agency’s argument in Actavis. The bill, co-sponsored by Senator Amy Klobuchar (D-Minn.) and Senator Chuck Grassley (R-Iowa), would make pay-to-delay agreements presumptively illegal rather than subject to the rule of reason.
“While the rule of reason standard is an appropriate test and we intend to apply that going forward, I do believe declaring them presumptively invalid would also further help us put a stop to these types of settlements,” Ramirez said.
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