Reverse Payment Patent Settlements in the Pharmaceutical Industry: A Year in Review

This past year has seen renewed challenges to reverse payment settlement agreements in the pharmaceutical industry. Since the Supreme Court's Actavis decision in mid-2013, potentially anti-competitive agreements are reportedly down, enforcement continues and more plaintiffs are seeing success as private class actions move forward at both the class certification and summary judgment stages.

This trend is expected to continue into 2018 amid a greater number of patent settlements but fewer (or none) with any potential reverse payments. Despite the trend that the industry is reducing (or halting) its use of reverse payment settlements, we expect: (1) new litigation will begin and ongoing litigation will continue as it relates to pre-Actavis settlement agreements; and (2) new litigation centered on post-Actavis settlements will be much less prevalent in 2018 and on a going-forward basis.

U.S. Federal Trade Commission Enforcement Efforts

The Federal Trade Commission's (FTC) relentless pursuit of reverse payment settlements continued in 2017 with ongoing litigation and a report showing that allegedly anti-competitive reverse payment settlements were down for the second consecutive year after the Supreme Court's seminal Actavis decision.1 The FTC's decades-long efforts appear to finally be resonating both within the industry and in the federal courts - even Chairwoman Maureen Ohlhausen recently stated that "it may be that we have finally started to turn the corner" on reverse payment settlements.2 As it stands, the FTC continues to vigorously litigate:

FTC v. Actavis, Inc.: AndroGel: The FTC challenged the patent settlement between Solvay Pharmaceuticals, Inc. (Solvay) and three generic manufacturers, including Watson Pharmaceuticals, Inc. (later acquired by Actavis, Inc.), regarding Solvay's branded testosterone-replacement therapy drug AndroGel. The FTC alleged that simultaneously with the settlement, Solvay entered into side deals designed to funnel value to the generic manufacturers in exchange for their agreement to delay their generic AndroGel entry. After the district court dismissed the case and the 11th Circuit affirmed, the Supreme Court held that the Rule of Reason applied to reverse payment settlements. On remand, discovery is ongoing. Endo Pharmaceuticals, Inc. & Allergan plc: Lidoderm: On January 23, 2017, the FTC filed a complaint against Endo Pharmaceuticals, Inc. and several generic manufacturers alleging that Endo's agreement not...