2025: Reverse-Payment Settlements Unleashed

Dec 16, 2010

The year is 2025. For the past two decades, brand-name drug companies have settled infringement lawsuits with generic firms by paying them to drop their patent challenges. Early in the 21st century, courts had explained that this was the natural state of affairs. By 2025, this is true many times over.

This outcome traces back to 2005, when the Schering and Tamoxifen appellate courts upheld reverse-payment agreements. In the five years before that, drug firms had been more careful. In 2000, the FTC announced that it would challenge such settlements. And the first appellate case to address the issue, Cardizem, found one such agreement to be per se illegal. As a result, parties settled cases, but without payments from brands to generics, and with licenses allowing early generic entry.

After 2006, the pendulum swung quickly in the other direction. To be sure, there were baby steps towards vigorous scrutiny. Between 2006 and 2010, Congress had considered legislation that would have made reverse payments illegal. The Federal Trade Commission had brought several high-profile challenges. And the Second Circuit, recognizing concerns with its Tamoxifen ruling, even requested that plaintiffs file for en banc review in the Cipro case.

None of these developments, however, slowed the careening snowball of per se legality. In this short article, I will offer three predictions for drug patent settlements in the next 15 years:

1.     The Eastern District of Pennsylvania court will deny summary judgment in the Cephalon case.

2.     The Supreme Court will grant certiorari, and affirm, in the 2nd Circuit Cipro case.

3.     Congress will pass reverse-payments legislation.

Going even further out on a limb, the first two predictions will occur in 2011 and the third will happen in 2017.


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