Merck Seeks Supreme Court Review Of 'Pay-For-Delay' Ruling

Citing the dire consequences for companies seeking to comply with antitrust law in the wake of a direct circuit split, major pharmaceutical makers are asking the Supreme Court to review a Third Circuit decision that declared settlement payments by brand-name pharmaceutical companies to their generic rivals to be anticompetitive. Merck & Co., Inc. recently filed a petition for a writ of certiorari,1 and all eyes in the pharmaceutical industry are watching to see whether the Supreme Court will agree to hear the case.

The Third Circuit in July ruled that reverse payment agreements — the so-called "pay-for-delay" settlements in which brand-name pharmaceutical companies pay generic rivals to drop patent challenges, thereby preserving exclusivity in the market — presumptively violate antitrust law. See In re K-Dur Antitrust Litig., 686 F.3d 197 (3d Cir. 2012). The decision directly conflicts with rulings in three other circuits,2 setting up a well-defined circuit split that could garner Supreme Court attention.

The landmark antitrust decision is possibly the second-most important decision in the health care field in recent years, analysts said, trailing only the Supreme Court ruling that upheld the Patient Protection and Affordable Care Act. In its petition for review, Merck now seeks to have the Court define the appropriate antitrust standard for evaluating settlements of patent litigation between brand-name and generic manufacturers when the settlement between them includes a payment.

Observers, including some federal judges, anticipate a Supreme Court decision would resolve the uncertainty surrounding reverse payments that was created after the Third Circuit's ruling. One district court already stayed cases regarding an alleged reverse payment deal for a narcolepsy drug until the Supreme Court decides whether to hear the case.3

The K-Dur case concerns the high blood pressure medication K-Dur 20, developed by Schering-Plough Corp. in the 1980s and now manufactured by a Merck subsidiary. The drug, which treats potassium deficiency, was the subject of multiple patent infringement actions brought against generic manufacturers beginning in 1985. Schering-Plough eventually settled, allowing the generic makers to license the product before the patent's expiration and paying them a total of $75 million. Schering-Plough merged with Merck in 2009.

The Federal Trade Commission issued a complaint for unfair competition against the brand-name and generic...