Monday’s “Oyez. . . Oyez” session formally involves a legacy-Solvay Labs, now AbbVie low-testosterone treatment called AndroGel®. But the implications of this argument will likely set the course for the legacy Schering-Plough (now New Merck) franchises subject to similar agreements.
To oversimplify a bit here, the patent laws and the antitrust laws set up conflicting goals: patents are essentially legally-supported monopolies, for a period of time (how long the period should be is the crux of the debate) — and the antitrust laws declare that almost all monopolies are presumptively unlawful. And so, private agreements paying generic competitors money not to challenge the length of the branded pharma patent(s) look more than a bit like agreements to continue monopolies — beyond what the patent statute originally envisioned as the monopolies’ end-date(s).
Afterall, the original legacy Schering-Plough K-Dur® 20 patent (the ‘743 patent) is now almost 24 years old. The typical outside date term for such a patent is 17 years. Moreover, K-Dur is simply a potassium chloride crystal, coated to dissolve slowly in the gut. While I do admire the 1980s era ingenuity it took to create the drug, nearly 24 years seems more than long enough to recoup the R&D, plus book a massive profit stream.
Here is — by way of background — the Third Circuit’s July 2012 K-Dur full opinion, holding such arrangements potentially violate the antitrust laws. That sets up a clear conflict between the federal Circuits, and thus — come Monday — the Supremes will ask questions, and hear argument, aimed at deciding which Circuits’ analyses make for the better balancing of policies, overall. Here’s a bit of the July 2012 K-Dur opinion:
. . . .After consideration of the arguments of counsel, the conflicting decisions in the other circuits. . . and our own reading, we cannot agree with those courts that apply the scope of the patent test. In our view, that test improperly restricts the application of antitrust law and is contrary to the policies underlying the Hatch-Waxman Act and a long line of Supreme Court precedent on patent litigation and competition.
First, we take issue with the scope of the patent test’s almost unrebuttable presumption of patent validity. This presumption assumes away the question being litigated in the underlying patent suit, enforcing a presumption that the patent holder would have prevailed. We can identify no significant support for such a policy. . . .
Rather than adopt an unrebuttable presumption of patent validity, we believe courts must be mindful of the fact that “[a] patent, in the last analysis, simply represents a legal conclusion reached by the Patent Office.” Lear, Inc. v. Adkins, 395 U.S. 653, 670 (1969). Many patents issued by the PTO are later found to be invalid or not infringed, and a 2002 study conducted by the FTC concluded that, in Hatch-Waxman challenges made under paragraph IV, the generic challenger prevailed seventy-three percent of the time. . . .
Additionally, as the experience of at least one court in this Circuit confirms, the high profit margins of a monopolist drug manufacturer may enable it to pay off a whole series of challengers rather than suffer the possible loss of its patent through litigation. . . .
Specifically, the finder of fact 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, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit. . . .
We will, of course, keep you posted on the implications of the Supreme’s “body English” after Monday’s Solvay arguments — as time permits.