FTC's authority
Once FTC acts, the statute's process for evaluating the competitive effect of the agreement is almost comically biased against
the settlement. To rebut the presumption of illegality, the parties would have to prove the settlement procompetitive "by
clear and convincing evidence"—a standard borrowed from patent law but not found elsewhere in antitrust law. During that process,
the "fact finder shall not presume" (a) that the patent would have excluded the generic, or (b) that the agreement "is pro-competitive"
simply because it allows early entry to market by the generic drug. The statute never considers the patent's potential to
exclude the generic option altogether as relevant to the competitive analysis. It is not even included in a list of "factors"
that "must" be considered—that's the same list that ends with "any other factor" identified by FTC "in its discretion" (6).
These standardless standards, along with new rule-making authority, would transform FTC from an antitrust enforcement agency
into a close regulator of all Hatch–Waxman settlements.
If the statute is passed and has a milder effect than I foresee, the likely cause will be its conceptual weakness and artless
wording. Courts may consider it odd, for example, that the statute makes two factors that courts have repeatedly held are
not anticompetitive (i.e., transfers "of value" and restrictions within the scope of the patent) presumptively unlawful. At
the same time, it attempts to make two other factors that courts have deemed critical to any competitive analysis (i.e., the patentee's right to exclude and the benefit of assured generic entry) irrelevant to the legality
of the agreement. The courts may conclude, as they have with respect to the Robinson–Patman Act (7), that this statute is
not intended to promote competition as such, and hence should be interpreted narrowly. The courts will also recognize, as
the statute's drafters apparently do not, that the failure to presume that a generic drug infringes a patent does not provide evidence that the generic drug does not infringe. The courts may
conclude that the procompetitive benefits of any settlement, especially one that guarantees some early entry, obviously outweigh
the "anticompetitive" effects of the statute's threshold factors (e.g., payments), which are not anticompetitive at all.
Kevin D. McDonald is a partner in the Washington office of Jones Day, a global law firm. He focuses on antitrust litigation. kdmcdonald@jonesday.com
.
References
1. Asahi Glass Co. v. Pentech Pharm., Inc., 289 F. Supp. 2d 986, 994 (N.D. Ill. 2003)
2. Sen. H. Kohl, Statement before the 111th US Congress, Cong. Rec. S1433, Feb.3, 2009.
3. H.R. 4899, Preserve Access to Affordable Generics Act, in the US Supplemental Appropriations Act 2010 (111th Congress, 2010).
4. H.R. 4899, p. 74.
5. H.R. 4899, p. 84.
6. H.R. 4899, p. 76.
7. The Robinson-Patman Act, which forbids certain kinds of price discrimination, was passed in the early 20th century at
the behest of small retailers attempting to survive competition from larger rivals such as Sears, Roebuck. Because it forbids
practices that are plainly not anticompetitive, it has been interpreted narrowly by the Supreme Court and others [e.g., Volvo
Trucks North Am., Inc. v. Reeder-Simco GMC, Inc., 546 US 164 (2006.)]
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