Issues

Patent Settlements

GPhA Position

GPhA opposes an outright ban on settlements as a means of resolving patent litigation. Such a "bright line" approach would have the unintended consequence of preventing pro-consumer settlements that actually would allow generic competition sooner than if the generic company took the case to conclusion and lost – which is a possibility in every single patent case. Further, such an across the board ban would have the perverse effect of reducing the number of patent challenges brought by generics, working contrary to the goal of creating incentives that bring lower cost generic drugs to market sooner.

Key Points

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Over the past 20 years, generic manufacturers have undertaken numerous successful patent challenges, generating tens of billions of dollars in savings for American consumers. Only a small number of these challenges have involved litigation settlements between the brand and generic companies.

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The generic industry's mission is to provide consumers with affordable medicines. While it seems counterintuitive, the fact is that patent settlements have proven to be a valuable component in achieving this mission, as they have brought more affordable products to market sooner than otherwise would have been possible.

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At best, the patent challenge process and patent litigation is a 50/50 proposition. Settlements that successfully conclude patent litigation typically result in the early and predictable introduction of generic competition, at a savings to consumers. Without the settlement, there would be no certainty to the introduction of generic competition for the brand product being challenged.

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Under the Medicare Modernization Act, generic and brand companies are required to submit patent settlements to both the Federal Trade Commission and Justice Department for their review.

Background

Over the past 20 years, generic manufacturers have undertaken numerous patent challenges as a result of the 180-day market exclusivity incentive under Hatch-Waxman.

Successful patent challenges have generated tens of billions of dollars in savings for American consumers, and only a small number have involved litigation settlements between the brand and generic companies.

As part of the 2003 Medicare Modernization Act, Congress enacted numerous statutory provisions designed to ensure prompt generic market entry and to punish companies that might enter into an anticompetitive agreement. Furthermore, under the MMA, settlement agreements between generic and brand companies must be filed with the Federal Trade Commission and Department of Justice, both of which reviews each agreement for any anticompetitive affect. These agencies can request changes to settlements, and take the appropriate action when a rare settlement is deemed anticompetitive. In sum, current law is doing an excellent job in policing settlements.

As policymakers look at the issue of patent settlements, they must avoid taking action that sweeps the bad settlements in with the good settlements that ultimately help consumers.