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The Federal Trade Commission’s amicus filing Monday in a Third Circuit pharmaceutical antitrust case shows where the commission has turned its efforts on fighting reverse-payment settlements after the U.S. Supreme Court’s ruling in FTC v. Actavis, a commissioner said in outlining her thoughts on such settlements.

FTC Commissioner Maureen K. Ohlhausen, who was speaking at an antitrust seminar at Dechert on Tuesday, said she thought the Supreme Court got it right in Actavis when it rejected last year both the FTC’s position that reverse-payment settlements were unlawful and the position taken by the U.S. Court of Appeals for the Eleventh Circuit that such settlements didn’t require antitrust scrutiny. The justices found the appropriate middle ground, Ohlhausen said.

Reverse-payment settlements, sometimes called pay-for-delay settlements, come into play in patent infringement cases when a brand-name company sues a generic company that has attempted, under the Hatch-Waxman Act, to bring its own generic version of a brand-name drug to market. The generic company will use as its defense the argument that the brand company’s patent is invalid or will not be infringed by the generic drug. The two companies then settle, with the brand company paying the generic company for the generic’s agreement not to enter the market for an agreed-upon amount of time.

In Actavis, the Supreme Court found certain payments to the generic company were acceptable as long as the brand-name company could show the payment was tied to some actual benefit. The question now, Ohlhausen said, is whether the “pay” in “pay-for-delay” has to be cash.

Several circuits, including the Eleventh Circuit, whose ruling went up to the Supreme Court in Actavis, had applied the scope-of-the-patent rule in determining these settlements are not subject to antitrust review as long as they don’t extend rights outside of the scope of what the original patent intended. The Third Circuit, in its July 2012 ruling in In re K-Dur Antitrust Litigation, found the settlements to be presumptively illegal and implemented a rule-of-reason analysis that required the defendant to show why the settlement didn’t run afoul of antitrust laws.

In Actavis, the Supreme Court took a middle-of-the-road approach, rejecting the Eleventh Circuit’s position that patent and not antitrust law applies, and also rejecting the Third Circuit’s ruling that placed the burden solely on defendants to disprove the presumption that these settlements violate antitrust laws.

Antitrust attorneys predicted at the time that Actavis would spawn more litigation as parties interpreted whether the “payments” or other incentives offered in these settlements were anti-competitive. They would appear to have been right.

Ohlhausen said district courts are now grappling with the issue and coming down on both sides. One of the big debates, she said, is whether no-authorized-generic agreements are inherently anti-competitive.

An authorized generic is chemically identical to its counterpart brand-name drug, but sold by the brand company or its representative as a generic product under the same regulatory approval as the brand-name drug, the FTC has outlined. A no-authorized-generic agreement means that the brand-name drug firm, as part of a patent settlement, agrees that it won’t launch its own authorized-generic alternative when the first generic company begins to compete, the FTC said.

Under the Hatch-Waxman Act, the first generic company to file gets 100 days on the market before any other generics are allowed to follow suit. Ohlhausen said FTC studies have shown that when the brand company agrees not to sell its generic version for that 100 days as part of a patent settlement, the generic company sells its generic version for significantly higher prices—an outcome the FTC has argued hurts consumers.

In an amicus brief Monday to the Third Circuit in In re Lamictal Direct Purchaser Antitrust Litigation, the FTC said reverse-payment settlements used to come in the form of cash.

“Today, after years of antitrust scrutiny, a branded-drug company may sometimes induce a generic company to stay out of the market by offering it payments in kind rather than in cash,” the FTC said. “This case exemplifies that phenomenon.”

In the Lamictallitigation, GlaxoSmithKline agreed not to sell its authorized generic when Teva first went to market with a generic version of the anti-epileptic drug. That was in exchange for settling a suit brought by Teva against GSK under the Hatch-Waxman Act, which was designed to move the needle on traditional patent concepts for the purpose of allowing generic drugs to enter the market sooner, the FTC has said.

The U.S. District Court for the District of New Jersey dismissed the Lamictal litigation in January, distinguishing it from Actavis in that there was a cash payment in Actavis that wasn’t present in the Lamictal litigation, the FTC said in its brief.

“If accepted, the district court’s narrow reading of Actavis would undermine the Supreme Court’s decision in that case and encourage parties to structure potentially anti-competitive reverse-payment settlements simply by avoiding the use of cash,” the FTC argued in its brief to the Third Circuit.

Ohlhausen said Tuesday that the “no-AG” commitments are the same as cash settlements.

Ohlhausen said she expected the FTC’s “significant focus” on non-merger enforcement that has existed for the past 15 years to continue into the foreseeable future.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.