This article – which can be found here – argues that a non-cash value transfer – particularly commitments by the producer of a branded drug not to launch a generic version of its drug – is able to bring a pay-for-delay agreement within the scope of the antitrust prohibition of reverse-payment patent settlement agreements.
It does so as follows:
The paper first looks at the law in the US as regards non-cash value transfer settlements.
In its landmark 2013 FTC v, Actavis decision, the US Supreme Court held that pharmaceutical patent settlements which involve ‘large’ and ‘unexplained’ reverse payments may breach the antitrust rules.
However, and as a result of the Supreme Court’s lack of detailed guidance, the lower US courts have in the last few years found themselves considering a fairly basic question: what constitutes a ‘payment’? While a couple of US district courts concluded that patent settlements that do not involve a cash transfer could not constitute unlawful payments under Actavis, most courts took the opposite view: that non-cash value transfers from originator to generic companies should be subject to the same rule-of-reason analysis as transfers of cash.
One of the main types of non-cash value transfer with which the US courts have had to grapple in recent years is agreements whereby an originator (i.e. the owner of a branded product) commits not to launch its own authorised generic version of the drug (‘no-AG agreements’). Recently, the Third Circuit held that a promise by an originator company not to introduce an ‘authorised generic’ version of its brand-name drug for a certain period should be subject to the same antitrust scrutiny as a reverse cash payment. Such a commitment can be of ‘great monetary value’ to a first-filing generic challenger – the FTC estimated the benefit at hundreds of millions of dollars –, and can thus have the same anticompetitive consequences as a monetary payment. This judgment is in line with a position consistently adopted by the FTC since 2011 as regards the correct treatment of such agreements.
Secondly, the paper considers the potential application of EU competition law to such agreements.
In the EU, no-AG agreements have received much less attention than in the US. This is, arguably, because the EU regulatory regime does not grant the same benefits to first-generic entrants as those available in the US. However, it seems clear that non-cash value transfers are not immune scrutiny under EU competition law.
This proposition finds support in the European Commission’s 2016 patent settlement monitoring report; and in the CMA’s Paroxetine decision, inasmuch as it considered that settlement agreements that limited supplies of paroxetine under controlled market conditions restricted competition by object.
However, commitments by an originator not to launch its own generic version must be subject to careful consideration by competition authorities: the value of any commitment not to launch an authorised generic is likely to be very uncertain at the date the agreement is entered into, and might ultimately prove to be valueless. The absence of an EU equivalent to the US first-filer system, and the resulting lack of any guaranteed exclusivity post-patent expiry in the EU market, means that the mere promise by a patentee not to enter the market with its own generic does not automatically translate into a meaningful lack of competition for the third-party generic product. Any competition analysis should therefore look at the effects of such an agreement, rather than considering it to be restrictive of competition ‘by object’.
This paper provides a short and informative overview of how to address non-cash consideration in the context of reverse patent settlements.
I agree with the authors’ conclusions, but not for the reasons they advance. In short, I am yet to be convinced that any type of pay-for-delay agreements should be treated as an object restriction (even though, at the moment, this is a matter for the courts). As such, I do not think that non-cash consideration should provide the basis for an object restriction either.