Reverse Payment Settlements: The U.S. Supreme Court Weighs In

| R. Jay Holsten

On June 17, 2013, the U.S. Supreme Court released its decision in Federal Trade Commission v. Actavis, Inc., in which it considered the presumptive validity (or invalidity) of so-called reverse payment settlement agreements between branded pharmaceutical manufacturers and their generic competitors. FTC v. Actavis Inc., No. 12-416, 133 S. Ct. 2223 (June 17, 2013).

The Actavis case concerned a patent infringement settlement between Solvay Pharmaceuticals, which had obtained a patent for its brand name drug AndroGel, and Watson Pharmaceuticals (a predecessor of Actavis), which had filed an application for approval to manufacture and sell a generic version of AndroGel based on the alleged invalidity of Solvay’s patent.

However, after receiving regulatory approval to do so, Watson entered into a settlement agreement with Solvay under which Watson agreed not to market generic AndroGel until 2015 — five years before the expiry of the AndroGel patent — and to promote AndroGel sales to doctors. Solvay agreed to share a portion of its AndroGel profits with Watson, which could result in an annual payment to Watson of up to $30 million per year.

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