Generic Drugmakers Will Challenge Patents Even When They Have a 97% Chance of Losing: The FTC Report that K-Dur Ignored

Jonathan Gleklen, Kelly Smith, Sep 13, 2012

A striking aspect of the Third Circuit’s decision on Hatch-Waxman patent settlements in the K-Dur litigation is the panel’s repeated reliance on conclusions that the Federal Trade Commission (“FTC”) has drawn from internal studies. It is hard to get through the opinion without running up against “a 2010 analysis by the FTC found,” a “2002 study conducted by the FTC concluded that,” or a “[d]ata analyzed by the FTC suggest,” leading up to a “we agree . . . with the FTC that.”

We leave to others the issue of due process in relying on an advocate’s characterization of evidence it has shared with no one else. We focus instead on an FTC finding that neither the Court nor, to our knowledge, anyone else has noticed. According to the FTC, the structure of the Hatch-Waxman Act creates economic incentives for generic drug makers (“Generics”) to mount extraordinarily thin patent challenges. A rational Generic, the FTC tells us, would challenge the patents protecting nearly 90 percent of the branded drugs sold in the United States (as measured by wholesale dollar sales) if it were the first to do so (a “first filer”) and it had even a three percent chance of success. Or to put it another way, a rational Generic company executive who is told by his lawyers that he has on the order of a 95 percent chance of losing, should respond, “Great! Challenge the patent.”

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