FTC v. Schering Plough — DOJ Rebuffs FTC in Reverse-Payment Antitrust Litigation

The Federal Trade Commission and Department of Justice have long fought over who should control and enforce antitrust laws within the U.S.  That debate continues . . .

FTC v. Schering-Plough (on petition for certiorari).

In a March 2005 decision, the 11th Circuit Court of Appeals set aside an FTC order that barred Schering-Plough from settling an infringement suit with generic makers regarding the patented blood pressure drug K-Dur.  In the settlement, Schering-Plough made a “reverse payment” to the potential infringers to settle the lawsuit. The FTC had concluded that the settlement was an "unreasonable restraint of trade."  The 11th Circuit, however, disagreed, finding that payment from a patent holder to a generic competitor cannot be the sole basis of a violation of antitrust law (and thus spurring deals totaling billions of dollars). 

In its petition for certiorari, the FTC presents the question:

Whether an agreement between a pharmaceutical patent holder and a would-be generic competitor, in which the patent holder makes a substantial payment to the challenger for the purpose of delaying the challenger’s entry into the market, is an unreasonable restraint of trade.

Before considering the petition, the Court requested the Solicitor General’s views on the case — i.e., the Court asked the DOJ to comment on whether FTC’s case should be heard.  In a response made public today, the Government’s view is that the issues are important, but the FTC has not brought a good case. 

[Reverse payment] settlements may pose a risk of restricting competition in ways that are not justified by a lawful patent, to the detriment of consumers. This case, however, does not present an appropriate opportunity for this Court to determine the proper standards for distinguishing legitimate patent settlements, which further the important goals of encouraging innovation and minimizing unnecessary litigation, from illegitimate settlements that impermissibly restrain trade in violation of the antitrust laws.

The DOJ’s arguments are essentially that: (1) the particular issues were not squarely addressed by the appellate court and (2) there is no circuit split.

As Foley’s Hal Wegner has noted, the Solicitor General’s view is not controlling.  For instance, in the upcoming LabCorp v. Metabolite case, the SG unsuccessfully argued against certiorari.

I’m sure that we’ll find more information at the Orange Book Blog.