Congress Attempts to Fix a System that Isn't Broken - Pharmaceutical Technology

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Congress Attempts to Fix a System that Isn't Broken
Pending legislation may give FTC the authority to regulate all Hatch-Waxman settlements.


Pharmaceutical Technology
Volume 34, Issue 9, pp. 73-74

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.
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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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