If the U.S. Supreme Court agrees to tackle the long-simmering question of whether so-called “pay-for-delay” deals between drug companies violate antitrust law, it’ll likely be up to Williams & Connolly’s Kannon Shanmugam to establish that the deals pass muster. On Friday, Shanmugam filed a petition for certiorari for Merck & Co., asking the court to review a July decision by the U.S. Court of Appeals for the Third Circuit that revived antitrust claims over Merck’s potassium-chloride supplement K-Dur. Shanmugam was joined on the petition by lawyers from his firm, Covington & Burling, McCarter & English, and Baker Botts. Pay-for-delay deals, also called reverse payment agreements, involve brand-name companies paying generics as part of patent settlements that delay the entry of generic drugs into the market. Schering-Plough, which is now owned by Merck, struck a $60 million deal in 1997 with Upsher-Smith that required Upsher to delay launching its generic version of K-Dur until 2001. Schering’s patent on the time-release mechanism for the drug was set to run until September 2006. Schering also agreed to a similar deal with ESI Lederle, the generic division of American Home Products, Inc. now owned by Pfizer. The Federal Trade Commission targeted all three companies in an administrative challenge in 2001, claiming that the settlements delayed cheaper generic versions of K-Dur and prolonged Schering’s patent monopoly. In 2005, however, the U.S. Court of Appeals for the Eleventh Circuit set aside an FTC order blocking the deals. The Eleventh Circuit found that as long as the agreements between Schering and the generics didn’t extend restrictions on competition beyond the scope of Schering’s patent rights, then the deals didn’t violate antirust law. The ruling has stood as a major obstacle to for the FTC and antitrust plaintiffs ever since. Last month’s Third Circuit decision, as we’ve reported, sprang from separate antitrust class action litigation related to the K-Dur deals that was brought by a group of wholesale and retail buyers. In March 2010 a Third Circuit judge sitting by designation in U.S. District Court in Newark dismissed the plaintiffs claims on summary judgment. But on appeal the Third Circuit became the first federal appellate court to side with pay-for-delay critics, finding that reverse payment agreements can be treated as “prima facie evidence of an unreasonable restraint of trade.” “Reverse payments permit the sharing of monopoly rents between would-be competitors without any assurance that the underlying patent is valid,” wrote Third Circuit judge Dolores Sloviter in the July 16 ruling.
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