Court nixes payoffs to generic firms

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The Third Circuit Court of Appeals has ruled that courts should treat “any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade.” The decision came in a case challenging a Schering-Plough agreement with Upsher and ESI for delayed entry of generic forms of its K-Dur potassium supplement.

The judges agreed with an earlier ruling by the DC Circuit which found that a payment flowing from an innovator to a challenging generic firm may suggest the anticompetitive intent of the parties to the agreement.

Breaking ground in the debate over payments from innovator drug companies to generic companies, the appellate judges said the presumption could be rebutted by showing that the payment was for a purpose other than delayed entry or offers some pro-competitive benefit.

The judges agreed with the FTC, which has argued against the  need to consider the merits of the underlying patent infringement suit because with no proof of other offsetting considerations, it is logical to conclude that a reverse payment was part of an agreement by the generic company to delay entry beyond the date that represents an otherwise reasonable litigation compromise.
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