Reverse Payments Bill

February 3, 2011 – Blog Post

Senator Herb Kohl (D-WI) recently introduced the Preserve Access to Affordable Generics Act (S.27) concerning patent settlements with payments from an NDA holder to an ANDA filer. If enacted, the act would allow the FTC to presume anticompetitive behavior where an agreement limiting ANDA-related activity involves the ANDA holder receiving anything of value. In such a case, unless the parties to the agreement could provide clear and convincing evidence that the agreement’s procompetitive benefits outweigh its anticompetitive effects, the FTC could then impose penalties on the parties. These penalties could include financial penalties up to triple the value of any consideration reasonably attributable to the violation as well as a cease and desist order against the agreement. The bill would give broad power to the FTC to establish regulations “implementing and interpreting” these provisions.

The “reverse payment” agreements that this bill concerns have been subject to controversy, as in cases like Louisiana Wholesale Drug Co. v. Bayer AG (on which we previously reported). The bill and other proposed measures like it seek to encourage generic drug companies to market their ANDA products, increasing competition and lowering drug prices. The bill itself emphasizes that the Federal Government bears a large percentage of drug costs. However, under the bill, NDA holders and ANDA filers would have fewer options for settlement, which may result in increased litigation challenging patent validity and therefore increased uncertainty about pharmaceutical patent value. Furthermore, the bill sets a three-year statute of limitations, which may produce uncertainty regarding FTC disapproval of ANDA-related settlements.