32 State Attorneys General Ask The Supreme Court To Overturn The Second Circuit’s Legal Standard Governing Reverse Payments

In January, 32 state attorneys general filed an amicus brief in the U.S. Supreme Court, urging the Court to hear and overturn Arkansas Carpenters Health and Welfare Fund v. Bayer AG (In re Ciprofloxacin Hydrochloride Antitrust Litig.), 05-2851-cv(L) (2d Cir. 2010) (“Cipro”).  In Cipro, the Second Circuit affirmed its legal standard governing so-called “reverse payments,” which are payments by a brand name drug manufacturer to a generic drug manufacturer in settlement of patent infringement litigation brought by the brand name manufacturer against the generic.  In exchange, the generic agrees not to market its allegedly infringing product.  Because the generic product has yet to be marketed, the generic does not face the risk of paying damages if its product is found to infringe.   

The Second Circuit affirmed its previous holdings that such settlements do not constitute a per se antitrust violation, and that patent settlements are presumptively lawful (unless the patent holder procured the patent by fraud on the Patent and Trademark Office or brought a baseless patent infringement lawsuit).  The state AGs argue in their brief that such settlements cost government agencies and consumers billions of dollars per year in the form of higher drug prices, and that “[m]aintaining open competition in pharmaceutical markets is critical to the States’ ability to provide drugs to their consumers at a reasonable cost, and to control escalating drug costs that threaten to swamp already strained budgets.”  Further, “the legal standard as to reverse payment agreements is subject to widely differing interpretations and results, [and] State antitrust enforcers need clear guidance.” 

The defendants opposed the plaintiffs’ petition for certiorari and the attorneys general’s brief, stating that it was principally a patent case that did not involve “any claims under federal antitrust laws,” thereby presenting “a poor vehicle for” the Supreme Court “to construe those laws.”  The defendants further argue that the “petitioners’ rhetoric about the importance of competition is out of place with respect to competition within the scope of a patent, which by definition grants an inventor freedom from competition within that limited scope for a limited time, in order to promote and reward invention.”

For a detailed discussion of the Cipro case, see this blog’s prior entries on the Second Circuit’s opinions.

The Supreme Court case docket is No. 10-762.

An article detailing the history of reverse-payment antitrust litigation is available here.