I've said it before: It may be a fool's errand to predict what
issues will pique the interest of the U.S. Supreme Court, but
it's hard to imagine that the justices won't agree this term to
take up the issue of pay-for-delay settlements. You remember
what those are: deals in which brand-name drug manufacturers pay
generic rivals to drop patent challenges so that the brand-name
maker retains its monopoly in the marketplace. These
controversial settlements, which the Federal Trade Commission
blames for billions of dollars of added prescription drug costs
every year, have been kicking around in federal appeals courts
for more than a decade. The Supreme Court has declined to hear
at least five previous pay-for-delay cases. But this term is
different. There's now a clear split between the circuits,
thanks to a ruling by the 3rd Circuit Court of Appeals that
explicitly rejected the reasoning of three other appellate
courts and held pay-for-delay deals to be anticompetitive on
their very face. And this term there's not just one
pay-for-delay cert petition for the justices to consider, but
two contrasting -- and equally compelling -- petitions that
raise the issue.
It's not exactly "Sophie's Choice," but the justices'
options were complicated by response briefs filed in the last
week in both cases. With the court likely to consider the
dueling cert petitions next month, possibly as soon as the Dec.
7 conference, it's worth taking a look at the arguments that the
players in both cases have employed to entice (or discourage)
the court.
The first pay-for-delay cert petition to hit the court this
term was filed in August by Merck, which was on the losing end
of the 3rd Circuit ruling that concluded pay-for-delay rules
should be presumed to violate antitrust laws. On Nov. 7, the
antitrust plaintiffs who won at the 3rd Circuit, led by the
Louisiana Wholesale Drug Co, filed their response to Merck's petition. Their counsel of record, Thomas Goldstein of Goldstein
& Russell, urged the Supreme Court not to grant cert at all,
arguing that there will be plenty of subsequent opportunities to
hear whether pay-for-delay deals are anticompetitive. The brief
said that the justices could wait, for instance, until there's a
final judgment in the Merck case, in which Merck still has an
opportunity to rebut the presumption of illegality.
But if the court decides to take up the issue, the brief
said, it should consider both the 3rd Circuit case and the
second case before the justices, in which the FTC has petitioned
for review of an 11th Circuit ruling that pay-for-delay rulings
are fine, as long as they don't exceed the scope of the brand
manufacturer's patent. Goldstein's clients agreed with the FTC
that it's important for the court to hear the government's
position, and that the justices will benefit from the
"experienced presentation" of the solicitor general's office
(which represents the FTC). Nevertheless, the brief said,
private antitrust plaintiffs also have a compelling interest in
pay-for-delay deals and the court would benefit from hearing
arguments from parties in both the Merck and FTC cases.
That's a rare but hardly unprecedented option for the court.
But it's not the preferred option of the FTC, which urged the
justices to review its loss at the 11th Circuit -- and not
Merck's 3rd Circuit case -- in a cert petition in October. On
Tuesday, two of the three winners in the 11th Circuit case also
asked the justices to accept the FTC's petition. Watson Pharmaceuticals and Solvay Pharmaceuticals both said that it's
time for the Supreme Court to decide the legality of
pay-for-delay deals that don't exceed the scope of the
brand-maker's patent, and that their case is the best vehicle
for that consideration. Obviously, Watson's lawyers at Skadden,
Arps, Slate, Meagher & Flom and Solvay's at Munger, Tolles &
Olson parted ways with the FTC on how the court should come out
on the question, but they agreed that the decision ought to be
based on the facts in the FTC case.
So if you're keeping score, of the five parties I've
mentioned so far, only Merck advocates for cert to be granted in
its case alone. The plaintiffs on the other side of the Merck
litigation argue that if the court takes either case, it should
take both. And three parties in the FTC case assert that it's
the better vehicle to determine the legality of pay-for-delay
settlements.
And then there's the wild card brief by Par Pharmaceuticals,
the third drug company in the FTC case. Par's lawyers at White &
Case portray the Supreme Court's pay-for-delay dilemma not as a
choice between the 11th and 3rd Circuit cases but as a decision
about whether the justices need to take up the issue at all.
(Even Goldstein's clients concede the court will have to resolve
the circuit split; they just argue, rather halfheartedly, that
the justices can put off a decision for awhile.) Par contends
that recent amendments to the Hatch-Waxman Act, which came after
the deals at issue in the FTC and Merck cases, have sent
pay-for-delay deals into decline. According to Par, there's no
need for the Supreme Court to get involved in an issue that is
resolving itself.
We should know in the next couple of months whether Par's
vote for neither beats the majority rooting for the justices to
take up the FTC case.
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