High Court Won’t Review ‘Pay-to-Delay’ Patent Deal

WASHINGTON (CN) - Bayer AG will not face a Supreme Court review of antitrust claims over a $398.1 million settlement it paid generic drug manufacturers to settle patent disputes over the antibacterial drug Cipro.

The justices declined to review an April 2010 decision from the 2nd Circuit, which upheld the company's "pay-to-delay" tactics.

Under the 1997 agreement, Barr Laboratories accepted $398.1 million from Bayer in exchange for dropping all challenges to Bayer's patent for Cipro (ciprofloxacin hydrochloride) and agreeing not to sell a generic version of before Bayer's patent expired.

A few years later, Cipro purchasers filed more than 30 antitrust lawsuits, claiming the settlement was anticompetitive.

The Federal Trade Commission has reported that pay-to-delay agreements cost U.S. consumers $3.5 billion annually in higher drug prices.

A federal judge dismissed the consolidated cases, expressing concern that the use of antitrust law in a patent dispute would "undermine the presumption of validity of patents in all cases ... and would work a revolution in patent law."

In the judge's view, the buyers needed to prove that the settlement fell outside the scope of Bayer's patent rights.

The Manhattan-based 2nd Circuit had noted in its ruling that it was bound by a 2005 ruling on the drug Tamoxifen. In that case, the 2nd Circuit held that a patent holder is entitled to protect its "lawful monopoly over the manufacture and distribution of the patented product."

"[A]s long as Tamoxifen is controlling law, plaintiffs' claims cannot survive," the court wrote.

It cited the government's objection to the Tamoxifen decision, evidence that pay-to-delay settlements are on the rise, and criticism from Sen. Orrin Hatch, co-author of the Hatch-Waxman Act, who said he found the settlements "appalling."

The Federal Circuit came to the same conclusion in 2008, noting that challengers failed to show how the agreements stopped generic manufacturers from challenging the patents or restrained trade outside the "exclusionary zone" of the patent.

That decision noted that Bayer sued four other generic drugmakers after striking the Barr settlement and has faced other patent invalidity claims, an indication that the agreements did not prevent any companies from challenging Bayer's patent.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit