The U.S. Supreme Court ruled 5-3 Monday a federal agency can sue drug companies
for alleged payoffs to competitors.
The ruling eventually could affect medicine prices for millions.
Justice Samuel Alito did not participate in the case, without offering an explanation. Justices sometimes withdraw from a case if they have a conflict of interest -- stock ownership or if they ruled on the case when sitting on a lower court.
The Drug Price Competition and Patent Term Restoration Act of 1984 (or the Hatch-Waxman Act) creates special procedures for identifying and resolving patent disputes between brand-name and generic drug manufacturers, one of which requires a prospective generic manufacturer to assure the Food and Drug Administration it will not infringe the brand-name's patents.
One way to provide such assurance is by certifying that any listed, relevant patent "is invalid or will not be infringed by the manufacture, use, or sale" of the generic drug.
Solvay Pharmaceuticals obtained a patent for its approved brand-name drug AndroGel. Subsequently, Actavis and Paddock filed applications for generic drugs modeled after AndroGel and certified under the federal law that Solvay's patent was invalid and that their drugs did not infringe it.
Solvay sued Actavis and Paddock, claiming patent infringement. But the FDA eventually approved Actavis' generic product.
However, instead of bringing its drug to market, court records say, Actavis entered into a "reverse payment" settlement agreement with Solvay, agreeing not to bring its generic to market for a specified number of years and agreeing to promote AndroGel to doctors in exchange for millions of dollars. Paddock made a similar agreement with Solvay.
The Federal Trade Commission filed suit alleging that Activis violated the Federal Trade Commission Act by unlawfully agreeing to abandon their patent challenges, to refrain from launching low-cost generic drugs, and to share in Solvay's monopoly profits.
A federal judge dismissed the complaint and a federal appeals court in Atlanta agreed.
The Supreme Court majority opinion, written by Justice Stephen Breyer, reversed, allowing the FTC suit to go forward and saying the agreement was not "immune from anti-trust attack," adding, "where a reverse payment threatens to work unjustified anti-competitive harm, the patentee likely has the power to bring about that harm in practice. The size of the payment from a branded drug manufacturer to a generic challenger is a strong indicator of such power."
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