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Last week the 11th U.S. Circuit Court of Appeals took the 6th Circuit to task for being too hasty to condemn pharmaceutical developers who pay their generic rivals to stay out of the market. Such payments might not violate federal antitrust laws, the 11th Circuit asserted in Valley Drug Co. v. Geneva Pharmaceuticals Inc., No. 02-12091, if the drug developer would have been entitled to market exclusivity in any event by virtue of the patents it holds. It accused the 6th Circuit of failing to give those patent rights sufficient weight in a June decision, In re Cardizem CD Antitrust Litigation, 332 F.3d 896. Hatch-Waxman Both cases stem from the Hatch-Waxman Act, a 1984 amendment to the Food and Drug Act designed to speed the introduction of generic equivalents to market. One way it did that is by relieving generic manufacturers of the obligation to conduct expensive and time-consuming safety and efficacy studies of their equivalents by allowing them to rely on the studies conducted by the maker of the original drug. The act allows a generic manufacturer to begin the process of getting Food and Drug Administration (FDA) approval for equivalents even before the original developer’s patent has expired, provided the generic manufacturer certifies that the patent is invalid or does not encompass the generic equivalent. If the original developer disputes that certification, it is entitled under the act to a 30-month protective period. Until that period expires, the FDA may not approve any generic equivalent, whether from the manufacturer that made the certification or a subsequent applicant for FDA approval. The act also rewards generic makers who aggressively challenge weak patents by giving them a short-term period of market exclusivity vis-�-vis other generic manufacturers. Once the generic manufacturer clears any patent problems (either because the original developer has not challenged the certification or because the patent has been invalidated by a lawsuit) and brings its product to market, the FDA cannot allow a subsequent generic product onto the market until 180 days have passed. In both the 11th and 6th circuit cases, drug developers entered into contracts with generic rivals who filed for FDA approval, claiming that the developers’ patents were invalid. In exchange for payments ranging from $12 million to $40 million per year, the generic makers agreed to keep their equivalents off the market. In both cases, antitrust challenges were lodged by generic makers who were not parties to the contracts. In its June decision, the 6th Circuit declared that an agreement between Hoescht Marion Roussel Inc., the manufacturer of a heart medicine, and a generic rival “was, at its core, a horizontal agreement to eliminate competition in the market for Cardizem CD throughout the entire United States, a classic example of a per se illegal restraint of trade.” The Florida trial court that reviewed two similar agreements between Abbott Laboratories and two of its generic rivals agreed with the 6th Circuit that such agreements are per se violations of federal antitrust laws. But in its Sept. 15 decision, the 11th Circuit reversed the Florida ruling. The court did not give the Abbott agreements a clean bill of health, but ruled instead that the trial court would have to give them more careful consideration before declaring them invalid. The court criticized its sister circuit for failing to consider whether such payments merely vindicated what a drug developer considered in good faith to be its patent rights. The court noted that hardly an eyebrow would be raised if a patent holder decided to pay a competitor as part of a settlement rather than incur the costs of litigating its patent rights. It directed the trial court to consider whether the payments at issue went beyond vindicating patent rights. Young’s e-mail address is [email protected].

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