On July 6, the Department of Justice (DOJ) filed a brief in the U.S. Court of Appeals for the 2nd Circuit expressing a new DOJ view on pay-for-delay settlements. The brief urges the 2nd Circuit to regard pay-for-delay settlements as “presumptively unlawful under Section 1 of the Sherman Act.” While the DOJ has not always supported a presumption against legality for these settlements, the Federal Trade Commission (FTC) has long been adamant that such settlements are unlawful. Now, more than ever before, the DOJ and the FTC seem to have a similar perspective on pay-for-delay settlements.

The July 6, 2009 brief filed by the DOJ signifies a stark departure from the Bush administration’s position. In 2006 and 2007, the DOJ urged the Supreme Court to refuse to hear two cases involving pay-for-delay settlements, involving the drugs K-Dur and Tamoxifen, because the DOJ felt these settlements were legal. In its latest brief, the DOJ states that “[r]everse payments are scarcely essential to the voluntary settlement of patent disputes.” The DOJ brief then goes on to discuss how such settlements have reduced the affordability of prescription drugs for consumers. The DOJ emphasized that it was not taking a stance on the specific settlement in the case at bar, involving the antibiotic drug Cipro, but made a more general statement about settlements including payments to the alleged patent infringer to keep the generic drug off of the market. The brief echoed earlier statements of Christine Varney, the new Assistant Attorney General, who announced during her confirmation hearings an intent to “align” the position of the DOJ with that of the FTC.

During a speech last month at the Center for American Progress, FTC Chairman Jon Leibowitz estimated that prohibiting pay-for-delay settlements would save consumers $3.5 billion per year. The anti-pay-for-delay sentiment in the FTC and DOJ has also reached Congress. Two bills in Congress, S.369 (introduced by Sens. Herb Kohl (D-WI.) and Chuck Grassley (R-IA)) and H.R. 1706 (introduced by Rep. Bobby Rush (D-IL-1.)) would help bring generic drugs to market sooner. These bills would prohibit brand name and generic drug companies from entering into agreements in which the brand name company pays off the generic company in return for the delay of the generic onto market. You can find out more about this legislation here.

The European Union also recently investigated the legality of pay-for-delay settlements. The EU study found that it took an average of seven months after expiration of the brand name company’s patent for a generic drug to come to market. This delay cost consumers about 3 billion euros (roughly U.S. $4.2 billion) from 2000 to 2007. You can read more about the EU investigation in the NY Times. http://www.nytimes.com/2009/07/09/business/global/09drug.html