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Mise à jour : 12 avril 2010 (Rédaction initiale : 6 avril 2010 )

Analyses Sectorielles

II-9.1 : A United States Federal Court found that payments made by Schering Plough in order to delay the introduction of generic forms of its drugs did not violate Antitrust Law, in a 26 March 2010 decision.

Main information

The U.S. District Court in Newark, New Jersey, dismissed a class action suit brought against drug manufacturer, Schering Plough, alleging that payments it made to two generic drug manufacturers in order to delay the introduction of generic forms of one of its products, violated antitrust law.

Thèmes

www.law.com

Context and Summary

In 1995, Schering-Plough filed a patent infringement suit against Upscher-Smith Laboratories, and in 1996, against ESI/Lederle Laboratories, claiming that these two generic manufacturers’ plans to introduce generic forms of its medicine for the treatment of potassium deficiency, “K-Dur”, violated its patents.

These cases were settled out of court, paying $60 million to Upsher-Smith and $5 million to Lederle. These payments were described as “licensing fees”, which would allow Schering Plough to commercialise various products developed by the two laboratories. In exchange, Upsher-Smith could not commercialise its generic form of K-Dur before 2001, and Lederle until 2004.
In the case at hand, HIP Health Plan of Florida v. Schering Plough (2:01-cv-01652), the plaintiffs requested that the federal judge examine these payments under Antitrust Law, for they claimed that the licensing agreements were merely designed to delay the introduction of generic drugs, and that Schering Plough did not plan to sell the licensed products.
The plaintiffs asked the Court to analyse these agreements under the terms of a position adopted by the Federal Trade Commission, and University of Iowa law professor Herbert Hovenkamp, which presumes that these “reverse payments” are anticompetitive.
However, no court has yet applied this method of analysis, and in its decision, the District Court used the habitual analysis employed by other Federal Courts. According to this method, as long as the “reverse payments” in question only restrict competition within the market of the patent, and as long as these patents are valid, the defendant is entitled to a summary judgment on the antitrust claims.
Indeed, Schering Plough’s original patent on K-Dur gave it exclusivity until 2006. Consequently, the court neither examined the merits of the original patent, nor the anticompetitive nature of the “reverse payments”. Instead, the case was dismissed because it was found that, according to the aforementioned habitual method of analysis, Schering-Plough did not seek restrictions on competition beyond those granted by its patent (the licensing agreements only excluded the introduction of generics until 2004), and did not seek to restrict competition beyond the market of the patented medicine.
Therefore, the Court did not rule on the plaintiffs’ claim that the licensing agreements were fictitious, that there were never any sales of the licensed products, and they were merely intended to slow the introduction of generic forms of K-Dur.

Brief commentary

This decision is interesting in light of the European Union’s recent inquiry of 8th July, 2009 into the possibly anticompetitive practices of the pharmaceutical industry, especially as relating to abuse of patent-related lawsuits in order to delay the introduction of generic forms of patented products.
Indeed, this case is interesting because the District Court did not examine the merits of the plaintiffs’ claims concerning the anticompetitive nature of the payments made to generic drug manufacturers by Schering-Plough.
Whether Schering-Plough intended to market the licensed products, or whether it simply intended to pay the generic manufacturers in order to delay the introduction of generic forms of K-Dur, the case may be revealing of a different approach to this issue in the United States than in Europe.
In Europe, drug consumers are generally price-insensitive, the cost of treatment being covered by mandatory national health plans, whereas in the United States, the cost of medicine is either paid for by private insurers, or in the case of uninsured patients, by the patients themselves.
This decision may indicate that the rapid introduction of generic drugs is not as politically important in the United States as in the European Union, for in the former, the reduction of healthcare costs is not as pressing a concern for public finances as in the latter.
However, it is interesting to note that in the bill of the celebrated Medical Insurance Law, recently passed by the United States Congress, a provision to ban “pay for delay” payments by pharmaceutical companies to generic drug manufacturers was dropped in the final text of the law. This may indicate that in the coming years, the United States will adopt stricter regulation on these types of deals in order to stimulate competition in the pharmaceutical market in order to lower the cost of treatment.

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