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New briefs complicate Supreme Court pay-for-delay conundrum

11/14/2012 COMMENTS (0)

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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