Term: 2012
Docket: 12-416
Federal Trade Commission, Petitioner v. Actavis, Inc., Et Al.
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12-416 FEDERAL TRADE COMMISSION V. ACTAVIS DECISION BELOW: 677 F.3d 1298 JUSTICE ALITO TOOK NO PART. CERT. GRANTED 12/7/2012 QUESTION PRESENTED: Federal competition law generally prohibits an incumbent firm from agreeing to pay a potential competitor to stay out of the market. See Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49- 50 (1990). This case concerns agreements between (1) the manufacturer of a brand--name drug on which the manufacturer assertedly holds a patent, and (2) potential generic competitors who, in response to patent-infringement litigation brought against them by the manufacturer, defended on the grounds that their products would not infringe the patent and that the patent was invalid. The patent litigation culminated in a settlement through which the seller of the brand-name drug agreed to pay its would-be generic competitors tens of millions of dollars annually, and those competitors agreed not to sell competing generic drugs for a number of years. Settlements containing that combination of terms are commonly known as "reverse payment" agreements. The question presented is as follows: Whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held). LOWER COURT CASE NUMBER: 10-12729-DD
In the case of Federal Trade Commission v. Actavis, Inc., the U.S. Supreme Court ruled in 2012 that "reverse payment" settlement agreements between brand name and generic drug manufacturers can sometimes violate antitrust laws. These settlements occur when a brand-name manufacturer pays a potential generic competitor to delay entering the market with a cheaper product, often as part of resolving patent litigation. The FTC argued that these payments are anti-competitive because they prevent consumers from accessing lower-cost alternatives to branded drugs for an extended period of time. The court agreed, ruling 5-3 that such deals could be challenged under federal antitrust law even if the agreement's anti-competitive effects fall within the scope of an exclusive patent held by the brand-name manufacturer.
The dissenting opinion in the Federal Trade Commission v. Actavis, Inc., case argued that the majority's decision to apply antitrust scrutiny to reverse payment settlements could potentially discourage generic drug manufacturers from challenging patents of brand-name drugs. The dissenters believed that such patent disputes are complex and costly, and allowing settlement agreements - including those involving large payments - can often be a more efficient solution than litigation. They also pointed out that these settlements do not extend beyond the life of the patent and thus should not be considered as anti-competitive or illegal under antitrust laws. Furthermore, they expressed concern about courts' ability to accurately assess whether a particular settlement would have anti-competitive effects without detailed knowledge of patent strength or market dynamics.
