Case Study: Federal Trade Commission v. Actavis, Inc.

This post is the next post in our series of case studies that reports on Supreme Court decisions that impact areas of U.S. law that may be relevant to international business practitioners. Our goal is to highlight informative cases that are current and meaningful to evolving areas of case law.

As the indicates, this post is about the recent decision in FTC v. Actavis, Inc. (Docket No. 12-416, Opinion entered June 17, 2013) regarding antitrust challenges to so-called “pay to delay” (PTD) agreements entered into in connection with protection of a valuable monopoly on a drug called AndroGel, which is used for treatment of low testosterone production in men.

Patents and the Pharmaceutical Industry

Modern patents generally last 20 years. In the pharmaceutical industry, as these years pass, generic drug makers eventually will produce competing products and offer them at a significantly lower price, as generic drugs are not subject to the same high costs of research and development, testing, and marketing which name-brand drugs just entering the market are. Sometimes, these companies will wait until a patent has formally expired. In other cases, as in this one, they will directly challenge the patent holder’s rights and may introduce a competing product prior to the final patent expiration date. In general, this means that the patent holder’s name-brand product faces competition from a cheaper generic alternative. Accordingly, patent holders want to keep generic products off the market for as long as possible.

What is a PTD Agreement?

For those who don’t know, PTD agreements are entered into between holders of drug patents and generic drug manufacturers. In a PTD agreement, in exchange for a payment, a generic drug maker will agree to delay introduction of their product onto the market, thereby preserving the patent-holder’s monopoly. Drug monopolies are extraordinarily valuable in certain cases, and the payments associated with PTD agreements can easily climb into the tens of millions of dollars.

Case Background

Many players in the drug market have historically entered into PTD agreements. In Actavis, however, the U.S. federal agency tasked with antitrust enforcement, the Federal Trade Commission (FTC), filed suit. The FTC alleged that certain companies had committed antitrust violations by entering into PTD agreements that were operative in the period prior to patent expiration. The defendants, on the other hand, argued that PTD agreements covering such a period could not be a violation of antitrust law.

The Holding

The Supreme Court disagreed, and held that courts would have to analyze specific PTD agreements on a case-by-case basis, regardless of whether or not the underlying patent had expired. That is, some such PTD agreements may violate antitrust law, while others may not. The case was therefore remanded for consideration consistent with the opinion of the Court.

If you are interested in learning more, the @WashULaw online LL.M. in U.S. Law program offers a course called “Intellectual Property” that can help expand your understanding of certain issues that may be relevant to cases like these.