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I. Introduction
A specialized area of particular focus at the intersection of patent and anti-
trust law is Abbreviated New Drug Application (ANDA) litigation under
the Hatch-Waxman Act. ANDA is an application for approval of a U.S.
generic drug, typically for an existing brand-name drug. The ANDA is sub-
mitted to the U.S. Food and Drug Administration’s (FDA) Center for Drug
Evaluation and Research, Office of Generic Drugs, which provides for the
review and approval of a generic drug. Once approved, an applicant may
manufacture and market the generic drug in the United States to provide
an alternative for the corresponding brand-name drug. All approved drugs,
including generic drugs, are listed in the FDA’s Approved Drug Products
with Therapeutic Equivalence Evaluations, which is also referred to as the
Orange Book.
In 2013, the Supreme Court resolved an unsettled question regarding
the legality of “reverse-payment” settlement agreements, which involve a
payment from a patent holder to an accused infringer in exchange for an
agreement by the accused infringer not to compete with the patent holder.1
While not finding such agreements presumptively illegal, the Court held
that they were susceptible to antitrust scrutiny and should be evaluated
under a “rule of reason” analysis. In so holding, the Court overruled the
majority of courts of appeal that had deemed the practice free of antitrust
implications, for reasons directly related to the nature of the activities
giving rise to such litigation.
1. Fed. Trade Comm’n v. Actavis, Inc., 133 S. Ct.2223, 186 L. Ed. 2d 343 (2013).
chapter 5
Antitrust Issues in ANDA
and Biosimilars Litigation
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CHAPTER 5
182
II. ANDA Litigation
5.1 “Reverse-Payment” Settlement Agreements
The Hatch-Waxman Act2 makes it an act of infringement to file an ANDA
with the FDA in the face of a patent holder/innovator having regulatory
approval to market a drug and a patent or patents on said drug, a formu-
lation of the drug or methods of making or using the drug. Generally, a
generic drugmaker filing an ANDA triggers this infringement provision
by asserting that the patent or patents listed with the FDA in the Orange
Book for an approved drug is not infringed, invalid, or unenforceable. The
patent holder then has 45 days to file suit, and, if filed, invokes a 30-month
stay in any approval of the generic drugmaker’s ANDA by the FDA.
The nature of this litigation is unlike any other patent infringement
case. The accused infringer’s product is not on the market in the United
States and accordingly is not at risk for a damages assessment, and may
not have investment at risk of an injunction. As noted by the Eleventh
Circuit in Schering-Plough v. FTC:3
It is uncontested that parties settle cases based on their perceived
risk of prevailing in and losing the litigation. Pre-Hatch-Waxman,
[the generic challengers] normally would have had to enter the
market with their products, incurring the costs of clinical trials,
manufacturing and marketing. This market entry would have
driven down [the patent holder]’s profits, as it took sales away. As
a result, [the patent holder] would have sued [the generic chal-
lengers], seeking damages for lost profits and willful infringement.
Assuming the patent is reasonably strong, and the parties then
settled under this scenario, the money most probably would flow
from the infringers to [the patent holder] because the generics
would have put their companies at risk by making infringing sales.
In ANDA litigation, it is the patent holder who has all the risk, spe-
cifically that her patent will be found invalid or unenforceable. As a con-
sequence, over the past decade, a greater tendency has developed for the
patent holder/drug innovator to settle ANDA litigation on terms where
the generic challenger enters the marketplace later than she would have
if she had prevailed in the litigation but generally earlier than if she had
lost, with the exchange of cash or other payment of value from the patent
holder to the accused infringer. This situation has raised antitrust con-
cerns not only from consumers but also especially by the FTC, who has
2. Drug Price Competition and Patent Term Restoration Act, 35 U.S.C. § 271(e)(2)(A).
3. Schering-Plough Corp. v. Fed. Trade Comm’n, 402 F.3d 1056, 1073–74 (11th Cir. 2005).
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Antitrust Issues in ANDA and Biosimilars Litigation 183
not only participated as a plaintiff or amicus in antitrust suits but has also
originated antitrust suits against both brand-name and generic parties to
such settlement agreements.
5.1.1 The FTC’s Objections to “Reverse-Payment”
SettlementAgreements
The FTC’s original position was that “reverse-payment” settlement agree-
ments are per se violations of section 1 of the Sherman Act as naked
agreements in restraint of trade. It should be noted that proponents of
“reverse-payment” agreements commonly refer to these agreements as
such, whereas detractors like the FTC commonly refer to these agreements
as “pay-for-delay” agreements. The FTC has called for an outright ban on
these agreements.4 Having universally lost in the courts on this theory, as
set forth in more detail later, the FTC has moderated its position, advocat-
ing that if these agreements are not presumptively illegal they should be
reviewed for antitrust liability under the “rule of reason.”
The FTC’s reasoning and the basis for its crusade against such prac-
tices are as follows. First, generic drug competition decreases the costs
of drugs to consumers and, more importantly, to the federal government,
the largest drug purchaser in the United States, if not the world. Second,
generic drug companies are motivated under the Hatch-Waxman Act to
challenge patents, because the prevailing “first to file” an ANDA with a
certification that the generic drug does not infringe or, more commonly,
that the innovator’s patents are invalid or unenforceable, will garner a
180-day statutory exclusivity period as the only generic drug on the mar-
ket. Third, reverse-payment settlements upset this statutory arrangement,
permitting “bad” patents to remain in effect and delaying generic drug
entry. (On the contrary, courts have found generally that reverse-payment
arrangements reduce the delay in generic drug entry; see more on this
later in the chapter). Fourth, generic drug companies prevailed in ANDA
litigation against brand-name drug companies 75 percent of the time
between 1992 and 2002.5 Finally, the FTC contends that branded drug
companies enter into reverse-payment arrangements because they know
that their patents are invalid or unenforceable and the agreement permits
them to undeservedly collect “monopoly” profits. This contention has been
almost universally rejected by the courts of appeal until very recently.6
4. See
FED. TRADE COMM’N
,
PAY-FOR-DELAY: HOW DRUG COMPANY PAY-OFFS COST CONSUMERS
BILLIONS
2 (2010).
5. See
FED. TRADE COMM’N, GENERIC DRUG ENTRY PRIOR TO PATENT EXPIRATION: AN FTC
STUDY,
at viii (2002) (providing incentives for brand-name companies to pursue these types
of agreements).
6. See Ark. Carpenters Health & Welfare Fund v. Bayer AG, 604 F.3d 98, 105 (2d Cir.
2010); In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323, 1337 (Fed. Cir.
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