FTC v Actavis ruling finds pay-to-delay may be anti-competitive

Managing IP is part of Legal Benchmarking Limited, 1-2 Paris Gardens, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

FTC v Actavis ruling finds pay-to-delay may be anti-competitive

Pharmaceutical companies can be sued for antitrust violations when a brand name drug company pays a generic rival to keep a copycat drug off the market, the US Supreme Court ruled on Monday

In their decision, the justices overturned a previous ruling by the Court of Appeals for the Eleventh Circuit, which found that the payments are permissible provided they do not keep competitors off the market for longer than the term of the patent covering the drug.

The practice, known as a “reverse payment” or “pay-to-delay” deal, resulted from a loophole in the 1984 Hatch-Waxman Act, which encouraged generic drug companies to sue to invalidate patents held by brand name rivals in an attempt to reduce the cost of medication.

SCOTUS justices

The dispute, Federal Trade Commission v Actavis, related to a brand name drug called AndroGel (testosterone gel), made by pharmaceutical company Solvay. Actavis and Paddock filed applications for generic rivals to AndroGel. Actavis and Paddock claimed Solvay’s patent was invalid and that their drugs did not infringe it. Solvay sued Actavis and Paddock for patent infringement.

After the FDA approved the generic version of the drug made by Actavis, Actavis entered into a reverse payment deal with Solvay, agreeing not to bring its producct to market for a specified period for a fee. Paddock and Par, a third manufacturer, made similar agreements with Solvay.

The FTC sued on antitrust grounds, but a district court dismissed the case. The FTC appealed, but the Eleventh Circuit concluded that as long as the anticompetitive effects of a settlement fall within the scope of the patent covering the drug, the deal is legal.

The Supreme Court threw out the appellate court’s ruling concerning the scope of the patent, but disagreed with the FTC’s claim that pay-to-delay deals should be assumed to be illegal, concluding that each one should be decided in court on its merits.

The Court split 6-3 in the decision. A strongly worded dissent, written by Chief Justice Roberts, said the majority opinion “departs from the settled approach separating patent and antitrust law, weakens the protections afforded to innovators by patents, frustrates the public policy in favor of settling, and likely undermines the very policy it seeks to promote by forcing generics who step into the litigation ring to do so without the prospect of cash settlements”.

Roberts said the correct approach would be simply to ask whether the settlement gives Solvay monopoly power beyond what the patent already gave it.

more from across site and SHARED ros bottom lb

More from across our site

Jan Phillip Rektorschek, founding partner at Pentarc in Germany, explains why the firm broke away from Taylor Wessing and discusses its plans for staying competitive
Royal Mail Group wins copyright and database right infringement case, in a dispute that can be linked to the history of postcodes in the UK
Managing partner Mark O’Donnell explains why people are at the centre of the Australian outfit’s investment focus and how being independent benefits the firm
IP is becoming one of the most significant drivers of major deals, and law firms are altering their practices to reflect the change
In the second in a new podcast series celebrating the tenth anniversary of IP Inclusive, we discuss IPause, a network set up to support those experiencing (peri)menopause
Firms are adapting litigation strategy as Brazil’s unique legal system and technical expertise have made preliminary injunctions a key tool in global patent disputes
A ruling on confidentiality by the the England and Wales Court of Appeal and an intervention from the US government in the InterDigital v Disney litigation were also among top talking points
Moore & Van Allen hires former Teva counsel Larry Rickles to help expand the firm’s life sciences capabilities
Canadian law firms should avoid ‘tunnel vision’ as exclusive survey reveals client dissatisfaction with risk management advice and value-added services
In major recent developments, the CoA ruled on director liability for patent infringement, and Nokia targeted Paramount at the UPC and in Germany
Gift this article