Is an absolute ban on reverse payments the appropriate way to prevent anticompetitive agreements between branded-and generic-pharmaceutical companies?

Texas Law Review

Volumn 86, Issue 3, 2008, Pages 647-666

  Kadura, Sheila ^a  

^a NONE

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EID: 41049092257     PISSN: 00404411     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (159)

1. U.S. CONST, art. I, § 8, cl. 8.
2. Christopher M. Kaiser, Patent Drafter Estoppel: Why Didn 't Sage Products Create a New Foreseeability Limitation on the Application of the Doctrine of Equivalents?, 13 J. INTELL. PROP. L. 305, 307-08 (2006).
3. 35U.S.C. § 154(a)(1) (2000).
4. Kaiser, supra note 2, at 308.
5. Kent S. Bernard & Willard K. Tom, Antitrust Treatment of Pharmaceutical Patent Settlements: The Need for Context and Fidelity to First Principles, 15 FED. CIR. B.J. 617, 624-25 (2006).
6. See FTC STAFF, ANTICIPATING THE 21 ST CENTURY: COMPETITION IN THE NEW HIGH- TECH, GLOBAL MARKETPLACE chs. 6-7 (1996) (describing one study demonstrating that 86% of patented inventions would have been developed in the absence of patent protection during the 1981-1983 period and a different study demonstrating that 60% of pharmaceutical inventions would not have been developed in the absence of patent protection).
7. Paying Off Generics to Prevent Competition with Brand Name Drugs: Should It Be Prohibited?: Hearing Before the S. Comm. on the Judiciary, 110th Cong. 149-53 (2007) (statement of Billy Tauzin, President & CEO, Pharmaceutical Research and Manufacturers of America (PhRMA) [hereinafter Hearing];
8. Bernard & Tom, supra note 5, at 623-25.
9. Laura J. Robinson, Analysis of Recent Proposals to Reconfigure Hatch-Waxman, 11 J. INTELL. PROP. L. 47, 47 (2003);
10. Peggy B. Sherman & Ellwood F. Oakley, III, Pandemics and Panaceas: The World Trade Organization's Efforts to Balance Pharmaceutical Patents and Access to AIDS Drugs, 41 AM. BUS. L.J. 353, 404-05 (2004).
11. C. Scott Hemphill, Paying for Delay: Pharmaceutical Patent Settlements as a Regulatory Design Problem, 81 N.Y.U. L. REV,. 1553, 1564 (2006).
12. Sherman & Oakley, supra note 8, at 404.
13. Hearing, supra note 7, at 150 (statement of Billy Tauzin, President & CEO, PhRMA).
14. Id.
15. Id. at 150-51;
16. see also Jaclyn L. Miller, Drug Price Competition and Patent Term Restoration Act: The Elimination of Competition Between Drug Manufacturers, 5 DEPAUL J. HEALTH CARE L. 91, 104, 103-04 (2002) ("[T]he drugs that do make it to the pharmacy must reimburse not only the money spent to get it to market, but also the money spent on researching the other possibilities that failed.").
17. Rebecca S. Eisenberg, Patents, Product Exclusivity, and Information Dissemination: How Law Directs Biopharmaceutical Research and Development, 72 FORDHAM L. REV. 477, 480-81 (2003).
18. Bernard & Tom, supra note 5, at 624.
19. Hearing, supra note 7, at 153 (statement of Billy Tauzin, President & CEO, PhRMA).
20. Id. at 152.
21. Id.
22. Sherman & Oakley, supra note 8, at 404.
23. Hearing, supra note 7, at 151-52 (statement of Billy Tauzin, President & CEO, PhRMA).
24. Id. at 152.
25. Miller, supra note 13, at 104;
26. Robinson, supra note 8, at 48.
27. Hemphill, supra note 9, at 1562-63.
28. Robinson, supra note 8, at 47-48;
29. Sherman & Oakley, supra note 8, at 404-05.
30. Hemphill, supra note 9, at 1563.
31. See id. at 1563, 1563-64 (explaining that "[e]conomic theory predicts that the expectation of profits from new discoveries will induce investment in research, development, and testing" and that the case for strong patents for pharmaceuticals is supported by the fact that the pharmaceutical industry does not follow the typical model wherein cumulative and incremental innovation from numerous innovators drives invention).
32. Andrew H. Berks, Note, Antitrust Aspects of the "Access to Affordable Pharmaceuticals" Act: Incentives for Generics out the Window?, 16 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 1305, 1307-08(2006).
33. 21 U.S.C. § 355(j)(2)(A)(iv) (2000);
34. Berks, supra note 27, at 1307-08.
35. See Sherman & Oakley, supra note 8, at 405, 404-05 (discussing studies estimating the cost of pharmaceutical development at $500 million to $600 million per drug, the cost of "pre-launch marketing" at $400 million per drug, and the cost of demonstrating bioequivalence of a generic drug at $1 million per drug).
36. 21 U.S.C. § 355(j)(2)(A)(vii).
37. Id. § 355(j)(2)(B).
38. 35 U.S.C. § 271(e)(2)(A) (2000).
39. 21 U.S.C. § 355(j)(5)(B)(iii).
40. Id. § 355(j)(5)(B)(iii)(II).
41. Id. § 355(j)(5)(B)(iv).
42. Hemphill, supra note 9, at 1579.
43. See id. ("A bounty-hunting generic firm will go on the attack if the drug is very valuable or the innovator's patents very weak (likely invalid or not infringed), or both.").
44. Jon Leibowitz, Comm'r, FTC, Exclusion Payments to Settle Pharmaceutical Patent Cases: They're B-a-a-a-ck! 3 (Apr. 24, 2006), available at http://www.ftc.gov/speeches/leibowitz/060424 PharmaSpeechACI.pdf.
45. Id.
46. Id.
47. Id. at 8.
48. See supra note 32 and accompanying text.
49. Hemphill, supra note 9, at 1568.
50. Alden F. Abbott & Suzanne T. Michel, The Right Balance of Competition Policy and Intellectual Property Law: A Perspective on Settlements of Pharmaceutical Patent Litigation, 46 IDEA 1, 12-13 (2005).
51. See 21 U.S.C. § 355(j)(5)(B)(iii) (2000) (stating that the FDA shall approve an ANDA when a district court holds the patent valid or not infringed).
52. Abbott & Michel, supra note 45, at 32.
53. See Hemphill, supra note 9, at 1570 (describing FTC antitrust challenges to settlements involving four drugs).
54. See id. ("Private antitrust suits have challenged settlements involving at least nine drugs, including the four challenged by the FTC").
55. Hearing, supra note 7, at 138 & n.44 (statement of Jon Leibowitz, Comm'r, FTC).
56. Hemphill, supra note 9, at 1580-81.
57. Abbott & Michel, supra note 45, at 11-12.
58. Id.
59. See id. at 11 (discussing empirical studies showing that courts invalidate about half of all patents litigated to judgment on validity issues).
60. John R. Allison & Mark A. Lemley, Empirical Evidence on the Validity of Litigated Patents, 26 AIPLAQ.J. 185, 187, 205 (1998).
61. Abbott & Michel, supra note 45, at 12.
62. Hearing, supra note 7, at 122 (statement of Jon Leibowitz, Comm'r, FTC).
63. Id. at 130.
64. Id.
65. Id. at 132.
66. Hemphill, supra note 9, at 1580.
67. Id. at 1580-81.
68. Id. at 1580.
69. See id. ("The patentee loses more under early entry than the alleged infringer gains.").
70. See id. at 1581 ("Not only does an agreement benefit the generic firm compared to its expected return from litigation ..., but in fact the generic firm does even better than it would have, had it won the suit.").
71. Hearing, supra note 7, at 101 (statement of Merrill Hirsh, Partner, Ross, Dixon & Bell, LLP).
72. Abbott & Michel, supra note 45, at 15-18.
73. Hearing, supra note 7, at 131-32 (statement of Jon Leibowitz, Comm'r, FTC).
74. See Abbott & Michel, supra note 45, at 17, 17-18 ("[N]othing in patent policy suggests that the scope of the patent includes the right to obtain exclusion through means not based on the patent, including through a payment.").
75. supra note 7, at 124 (statement of Jon Leibowitz, Comm'r, FTC).
76. Id. at 133.
77. Abbott & Michel, supra note 45, at 32.
78. Id.
79. Preserve Access to Affordable Generics Act, S. 316, 110th Cong. pmbl. (2007).
80. Id. § 2(a).
81. Id. § 2(a)(2)-(3).
82. Id. §2(a)(11).
83. Id. § 3(2).
84. Id.
85. The bill makes a settlement agreement unlawful if the ANDA filer receives anything of value from the branded-pharmaceutical patent owner and the ANDA filer agrees to delay market entry of its product. Id. § 3(2). Thus, the bill proposes an absolute ban on reverse-payment settlements.
86. 402 F.3d 1056 (11th Cir. 2005), cert. denied, 126 S. Ct. 2929 (2006).
87. Id. at 1065-66.
88. Id. at 1066.
89. Id.
90. Id. at 1066-67.
91. Petition for a Writ of Certiorari at 9, Schering-Plough Corp., 402 F.3d 1056 (No. 05-273).
92. Brief for the United States as Amicus Curiae at 11, Schering-Plough Corp., 402 F.3d 1056 (No. 05-273).
93. See supra note 57 and accompanying text.
94. Hemphill, supra note 9, at 1579-80.
95. Id. at 1580.
96. In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187, 206-07 (2d Cir. 2006).
97. Id. at 207.
98. Bernard & Tom, supra note 5, at 626 (citing In re Ciprofloxacin Hydrochloride Antitrust Litig., 261 F. Supp. 2d 188, 208 (E.D.N.Y. 2003).
99. Id. at 631.
100. Hearing, supra note 7, at 88-89 (statement of Bruce L. Downey, Chairman & CEO, Ban-Pharmaceuticals, Inc.).
101. See supra note 86 and accompanying text.
102. See supra note 34 and accompanying text.
103. Hearing, supra note 7, at 91 (statement of Bruce L. Downey, Chairman & CEO, Barr Pharmaceuticals, Inc.).
104. Id.;
105. Bernard & Tom, supra note 5, at 627.
106. Bernard & Tom, supra note 5, at 627.
107. Hearing, supra note 7, at 91 (statement of Bruce L. Downey, Chairman & CEO, Barr-Pharmaceuticals, Inc.).
108. Bernard & Tom, supra note 5, at 629-31.
109. Id. at 630-31.
110. Hearing, supra note 7, at 153 (statement of Billy Tauzin, President & CEO, PhRMA).
111. Bernard & Tom, supra note 5, at 630.
112. See supra subpart IV(B).
113. Bernard & Tom, supra note 5, at 629-30.
114. Id.
115. Hearing, supra note 7, at 155 (statement of Billy Tauzin, President & CEO, PhRMA).
116. See id. (explaining the skewed risk-reward calculations involved when branded-pharmaceutical companies litigate against generic competitors).
117. Id.
118. Id.
119. Id.
120. See id. at 154-55. Billy Tauzin, the President and CEO of PhRMA, explained why a branded firm may be willing to negotiate a settlement that allows early market entry of a generic product: Settlements create an environment of certainty, which allows parties to make business planning decisions with more efficiency and flexibility than can be achieved in the midst of an all-or-nothing legal dispute that may take years to resolve. It is therefore important that PhRMA members continue to have options to enter into procompetitive settlements, which allow them to get on with the business of developing new medicines for patients. Id.
121. Id. at 93 (statement of Bruce L. Downey, Chairman & CEO, Barr Pharmaceuticals, Inc.).
122. Id. at 91-93.
123. Id. at 92.
124. Judicial Panel Discussion on Science and the Law, 25 CONN. L. REV. 1127, 1145 (1993).
125. In re Ciprofloxacin Hydrochloride Antitrust Litig., 261 F. Supp. 2d 188, 208 (E.D.N.Y. 2003).
126. Brief for the United States as Amicus Curiae, supra note 87, at 10.
127. Preserve Access to Affordable Generics Act, S. 316, 110th Cong. § 3(2) (2007);
128. see also Hearing, supra note 7, at 155 (statement of Billy Tauzin, President & CEO, PhRMA) ("In fact, as Judge Richard Posner has pointed out, this broad description could almost cover any settlement agreement because a generic challenger logically would only settle in exchange for something of value." (emphasis omitted).
129. Hearing, supra note 7, at 78-79 (statement of Billy Tauzin, President & CEO, PhRMA).
130. Id.
131. See id. at 156 ("The ability to license this technology, and offer that as part of a settlement, can facilitate the parties' efforts to reach and structure a mutually acceptable - and procompetitive - settlement. This has in fact been demonstrated in the very cases that have come before the courts.").
132. Hemphill, supra note 9, at 1594.
133. Id.;
134. Abbott & Michel, supra note 45, at 13-14.
135. Bernard & Tom, supra note 5, at 630;
136. Gregory Glass, Why Settle?, UPDATE, Sept.-Oct. 2005, at 17, 17-18.
137. Bernard & Tom, supra note 5, at 630;
138. Glass, supra note 127, at 17-19.
139. See Bernard & Tom, supra note 5, at 630;
140. Glass, supra note 127, at 17-19.
141. Hearing, supra note 7, at 121, 131-32 (statement of Jon Leibowitz, Comm'r, FTC).
142. Id. at 148-49 (statement of Billy Tauzin, President & CEO, PhRMA).
143. Bernard & Tom, supra note 5, at 30;
144. Glass, supra note 127, at 17-19.
145. See supra notes 99-100 and accompanying text.
146. See supra note 101 and accompanying text.
147. Hearing, supra note 7, at 148-49 (statement of Billy Tauzin, President & CEO, PhRMA).
148. Id. at 150-51, 154;
149. see supra notes 8-14 and accompanying text.
150. Hearing, supra note 7, at 154 (statement of Billy Tauzin, President & CEO, PhRMA).
151. See Schering-Plough Corp. v. FTC, 402 F.3d 1056, 1075 (11th Cir. 2005), cert. denied, 126 S. Ct. 2929 (2006) ("[T]he caustic environment of patent litigation may actually decrease product innovation by amplifying the period of uncertainty around the drug manufacturer's ability to research, develop, and market the patented product or allegedly infringing product.").
152. Hearing, supra note 7, at 157-58 (statement of Billy Tauzin, President & CEO, PhRMA).
153. Id. at 159.
154. Id. at 158.
155. Id. at 95 (statement of Bruce L. Downey, Chairman & CEO, Barr Pharmaceuticals, Inc.).
156. Michael Perry, Note, Antitrust Liability for Pharmaceutical Patent Settlements After Tamoxifen and Schering-Plough, 12 STAN. J.L. BUS. & FIN. 166, 184 (2006).
157. Id.
158. Bernard & Tom, supra note 5, at 632.
159. Id. (quoting Asahi Glass Co. v. Pentech Pharms., Inc., 289 F. Supp. 2d 986, 993 (N.D. Ill. 2003)).