FTC Again Urging Justices To Hear Drug-Patent Case

It is unusual to see an intra-governmental dispute about a case before the Supreme Court, but it has become an annual event for the Federal Trade Commission and the antitrust division of the Justice Department.

The commission wants the court to take up the issue of "reverse payments," by which pharmaceutical companies that hold patents for certain medicines pay rivals to keep their generic and cheaper versions off the market. The commission thinks that the practice violates antitrust laws and costs consumers billions in higher drug prices.

But lower courts have ruled for the drug companies, and for the second straight year the Justice Department has told the Supreme Court that it does not believe the case at hand is an "attractive vehicle" for exploring the issue.

"We're obviously very disappointed, because we think it's one of the most important cases for consumers presented to the court this year," said FTC Commissioner Jon Leibowitz.

The justices often invite the solicitor general, who represents the government before the court, to give his opinion on whether they should take a case. The court usually, but not always, accepts the advice.

But this is at least the third time that the court has expressed interest in the issue, and even the Justice Department acknowledges that it is an important policy question.

"The petition raises important and complex issues concerning the antitrust treatment of settlements in patent cases, particularly settlements that provide for delayed entry into the market by the alleged infringer in exchange for a 'reverse payment' from the patent holder," according to the government's brief.

The FTC says that such payments, also called "exclusion payment settlements," thwart the intent of the Hatch-Waxman Act of 1984, which was meant to speed market entry of generic drugs. The commission contends that brand-name companies are finding it more profitable simply to settle the inevitable lawsuits by giving the generic competitor a slice of the profits in return for staying out of the market.

"These settlements are harmful because the parties are resolving their dispute at the expense of consumers," Leibowitz told Congress last month.

The drug companies say it is wrong to assume that all settlements of what could be protracted and expensive litigation are suspect, and so far the settlements have been upheld in two circuit courts of appeals.

The solicitor general's brief at times seems to be making a case for the court to accept the issue. "Patent litigation settlements that include reverse payments . . . implicate complex and conflicting policy considerations at the intersection of patent and antitrust law," the brief states.

It contends that the U.S. Court of Appeals for the 2nd Circuit "applied an erroneous standard" in deciding Joblove v. Barr Laboratories Inc. and acknowledges the decision "is arguably in some tension" with the way the Court of Appeals for the 11th Circuit decided FTC v. Schering-Plough Corp., last year's case.

Those are usually the kinds of factors the court looks for in accepting cases.

But the brief -- which uses the on-the-one-hand, on-the-other-hand formulation three times -- ultimately says the court should pass.

"The federal antitrust claims in this case appear to be moot, the factual setting is atypical and unlikely to recur, and subsequent regulatory changes may undercut one of the theories of competitive harm advanced by petitioners," the brief states.

In the meantime, the FTC has also gone to Congress looking for relief.