Cash Payments Not Required for Antitrust Scrutiny, Appeals Court Rules

Relying on a U.S. Supreme Court precedent involving Actavis, the Third Circuit Court of Appeals has ruled that patent settlements in pay-for-delay cases can face antitrust scrutiny even if they do not include cash.

The Third Circuit’s ruling stems from a settlement in which Teva agreed to end a challenge to GlaxoSmithKline’s patents on lamotrigine, Lamictal’s active ingredient, to gain early entry into the $50 million lamotrigine chewables market. In exchange, GSK committed to not produce its authorized generic version of Lamictal tablets for the $2 billion market.

King Drug Co. of Florence and Louisiana Wholesale Drug Co. sued, contending the “no authorized generic” agreement qualifies as a reverse payment under FTC v. Actavis. In that case, the Supreme Court ruled antitrust laws are likely to forbid reverse payments if the arrangement is intended to maintain and share patent-generated monopoly profits.

The Third Circuit’s decision says the agreement between Teva and GSK falls under the Actavis rule because it may represent an unusual, unexplained reverse transfer of considerable value, possibly a payment to eliminate the risk of competition.

In King Drug Company of Florence, Inc., et al v. Smithkline Beecham Corporation, et al, the court vacated a U.S. District Court for the District of New Jersey decision and remanded the case for review.

GSK is disappointed by the decision and continues to believe plaintiffs failed in their attempt to show there was an agreement to harm competition, spokesman Marti Skold Jordan says.

Teva did not comment and the plaintiffs could not be reached for comment by press time. — Jonathon Shacat