Merck Knocks Pay-for-Delay Ball up to Supreme Court

By Mari Serebrov
Washington Editor

Calling it "one of the most significant unresolved legal questions currently affecting the pharmaceutical industry," Merck & Co. Inc. hit the pay-for-delay ball into the Supreme Court, asking the court to, once and for all, determine whether the reverse settlements violate federal antitrust laws.

The question has been batted around in the lower courts for more than a decade, and three appellate courts have ruled that the agreements between brand and generic drugmakers are legal – as long as they don't delay market access to a generic beyond the patent expiration of the brand drug.

But last month, the U.S. Court of Appeals for the Third Circuit decided that such settlements are, on their face, anticompetitive, striking down two Merck agreements that the 11th Circuit had upheld. Those agreements, with Upsher-Smith Laboratories and ESI Lederle, involved K-Dur, a sustained-release formulation of potassium chloride. The settlements allowed the generics to come to market two to five years before K-Dur's Sept. 5, 2006, patent expiration. (See BioWorld Today, July 18, 2012.)

In rejecting the "scope of the patent" test used by the other circuits, Merck said the Third Circuit applied a "quick look" mode of antitrust analysis, in which it held that "any payment from a brand manufacturer that accompanies an agreement by the generic manufacturer not to market its drug for some period of time constitutes prima facie evidence of an unreasonable restraint of trade." The drugmakers' only defense, according to the court, is to show that the payment provides a pro-competitive benefit that would otherwise be unavailable.

That ruling created a conflict among the appellate courts and an uncertainty concerning the validity of biopharma patent settlements, Merck said in its brief to the Supreme Court. And the Third Circuit decision is already being expanded by the FTC, which cited it earlier this month in an amicus brief contending that an agreement not to launch an authorized generic constitutes a payment. (See BioWorld Today, Aug. 15, 2012.)

Until the Supreme Court "provides definitive guidance, pharmaceutical companies will be operating under a cloud of uncertainty concerning the legal standards applicable to settlements of patent litigation," Merck said, as it urged the court to provide that guidance now.

This is not the first time the high court has been asked to consider the legality of Merck's settlements. After striking out in the 11th Circuit when it challenged the settlements as part of its ongoing campaign against pay-for-delay agreements, the FTC appealed to the Supreme Court, which denied cert.

The commission filed an amicus brief when several pharmacies challenged the settlements in the case that ended up in the Third Circuit.

In its brief to the Supreme Court, Merck traced the pay-for-delay settlements back to the "unique features" of the Hatch Waxman Act, which allows an infringement challenge before a generic is marketed.

Under a regular infringement action that takes place after a product is marketed, an alleged infringer has much to lose and the patentee something to gain in the way of damages and lost profits, Merck said. But under Hatch Waxman, the alleged infringer typically has little to lose as it will not be liable for damages since it has yet to launch its generic. The patentee, on the other hand, has little to gain in damages, but its patent protection is on the line.

These "asymmetric litigation risks" in Hatch-Waxman often make the patentee willing to make a pay-for-delay concession to the generic company, Merck said.

FDA, NIH to Exempt Records

To protect the confidentiality of sources and investigations into scientific research misconduct, the FDA and the National Institutes of Health (NIH) are issuing direct final rules to create a new system of records that will be exempt from certain requirements of the Privacy Act.

Under the act, individuals generally have a right to information about themselves. But the law allows agency heads to exempt certain records containing investigatory material compiled for law enforcement purposes. In some instances, agencies also may exempt material if its disclosure would reveal the identity of a confidential source.

The exemptions are needed for research misconduct, the FDA said, because "release of an accounting of disclosures to an individual [under investigation] could prematurely reveal the nature and scope of the . . . investigation and could result in the altering or destruction of evidence, improper influencing of witnesses and other evasive actions that could impede or compromise the proceeding."

The exemption also is needed during and after the investigation to protect confidential sources from retaliation, according to the agencies.

The rules, published in Tuesday's Federal Register, will become effective Jan. 10, 2013, if no significant adverse comments are received. Comments on the NIH rule are due by Oct. 12. Comments on the FDA rule must be submitted by Nov. 11.

Court Upholds Alimta Patent

In a precedent-setting case, the U.S. Court of Appeals for the Federal Circuit upheld Eli Lilly and Co.'s compound patent for its cancer drug Alimta.

The patent was challenged by Teva Parenteral Medicines Inc., Barr Laboratories Inc. and APP Pharmaceuticals Inc., all of which filed abbreviated new drug applications with a paragraph IV certification. Citing two earlier, expired patents, the generic-drug makers asserted that Lilly's '932 patent, which expires July 24, 2016, is invalid for "obvious-type double patenting."

The generic companies contended that the correct analysis for double patenting involves only the differences between the claims at issue. But the Federal Circuit said with a compound patent, the later claims must be compared with the earlier claims as a whole.

With its decision, the court carved out a distinction in the double patent analysis for method claims and compound claims, Mary Webster, a patent attorney with Nixon Peabody, told BioWorld Today.

The court's ruling will leave Alimta (pemetrexed), which also has a six-month exclusivity, with no generic competition until Jan. 24, 2017. The drug was approved in 2004 to treat mesothelioma and in 2008 for non-small cell lung cancer.