Bad Medicine: FTC v. Actavis, Inc. and the Missed Opportunity to Resolve the Pay-for-Delay Problem

Susan Schipper

In Federal Trade Commission v. Actavis, Inc., the Supreme Court of the United States considered whether the U.S. Court of Appeals for the Eleventh Circuit correctly dismissed the Federal Trade Commission’s (“FTC”) antitrust challenge to a reverse payment settlement agreement between brand-name and generic drug manufacturers, in the context of patent litigation, for the hormone medication AndroGel. This type of settlement is colloquially referred to as a “pay-for-delay” arrangement. The Court held that the Eleventh Circuit erred in failing to allow the FTC to challenge the legality of the settlement, where a brand-name pharmaceutical company, Solvay Pharmaceuticals, agreed to pay the named generic, Actavis, Inc., and other generic drug companies, hundreds of millions of dollars to refrain from marketing a generic version of AndroGel until 2015. The FTC alleged in its complaint against the settling drug companies that the reverse payment component of their settlement was a collusive, horizontal restraint on trade and was therefore a violation of antitrust law. The Eleventh Circuit dismissed the FTC’s challenge and held that the monopoly powers conferred to pharmaceutical patent-holders precluded the FTC from bringing an antitrust action against the parties engaging in pay-for-delay as long as the anti-competitive effects of the pay-for-delay do not exceed the scope of the patent’s monopoly. The U.S. Supreme Court reversed, holding instead that reverse payment settlements are not impervious to antitrust challenges and can be decided using a traditional antitrust framework.