High Court Brings Economics Back To Pay-For-Delay Analysis

Mon Jun 17 16:24:38 EDT 2013
By Dr. Sumanth Addanki, Dr. Alan Daskin, and Dr. Christine Siegwarth Meyer

In this guest column from Law360, NERA Senior Vice Presidents Dr. Sumanth Addanki and Dr. Christine Siegwarth Meyer and Vice President Dr. Alan Daskin examine the US Supreme Court's much-anticipated decision in Federal Trade Commission v. Actavis Inc. et al. The Court ruled 5-3 that the analysis of so-called "reverse payment" settlements of Paragraph IV ANDA (abbreviated new drug application) litigation in the pharmaceutical industry should be carried out under the rule of reason. In doing so, the authors note, the Court resolved a circuit split, rejecting both the "scope of the patent" approach and the FTC's proposed presumption of illegality, putting the question squarely back in the realm of economics, where it belongs. Dr. Addanki, Dr. Daskin, and Dr. Meyer take comfort in the Court's focusing the analysis on an agreement's competitive effects and point out that such analysis requires comparing the settlement to the expected outcome of the litigation. Presumably, that would require some consideration of the merits of the underlying patent suit. However, the authors note, the Court's suggestion that the size of the payment is a workable surrogate for the patent's weakness has no economic basis. As the Dissent points out, the dollar value of the payment may reflect other considerations having nothing to do with the strength or weakness of the patent.