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[Marp2]

This case is an antitrust challenge to an increasingly common practice in the pharmaceutical industry. Brand-name companies faced with generic competition pay the would-be competitor an amount of money to stay out of the market. The payment comes in the form of settling a dispute over the validity or infringement of the brand-name company’s patent. Because generic entry reduces drug prices, these “pay for delay” or “reverse payment” agreements are alleged to reduce competition and increase drug costs. The Federal Trade Commission sued drug companies over one such deal. The court of appeals rejected that claim, explaining that the brand name’s patent includes the right to exclude competitors.

Today, by a vote of five to three, the Supreme Court reversed and held that the claim can go forward. Justice Breyer wrote the Court’s opinion, joined by Justices Kennedy, Ginsburg, Sotomayor, and Kagan. Chief Justice Roberts dissented, joined by Justices Scalia and Thomas. Justice Alito was recused from the case.

The Court held that the government and private parties may seek to prove that these payments violate the antitrust laws. It refused, however, to hold them presumptively illegal. The ruling is likely to essentially put an end to such payments in the future. Litigation over previous deals will continue in the lower courts.

[Disclosure: Goldstein & Russell, whose lawyers contribute to the blog, filed an amicus brief in support of the FTC in the case].

Text of Opinion

http://www.supremecourt.gov/opinions/12pdf/12-416_m5n0.pdf