INNsight article by Alan Klein, January 2013

In prior articles, I have highlighted important issues roiling in American courts over the past decade involving challenges to patent settlement agreements by the federal government and private litigants, and the federal preemption of products liability lawsuits against generic drug companies.  Within the past few weeks, the U.S. Supreme Court has agreed to hear appeals to resolve, once and for all, the debate on (a) whether brand/generic settlement agreements resolving Paragraph IV litigation challenges to brand name drug patents constitute a violation of the antitrust laws, and (b) whether, following the Supreme Court’s 2011 ruling in Pliva, Inc. v Mensing striking down failure-to-warn products cases, plaintiffs may nevertheless sue generics for design defects in their medications.

Patent Settlement Agreements

The Hatch-Waxman Amendments to the Food, Drug and Cosmetic Act permit a generic drug manufacturer, when filing its Abbreviated New Drug Application, to contest the validity of the brand name drug patent.  These challenges more frequently than not lead to extensive, time-consuming litigation that can drag on for years and become very costly to both parties.  While many brand patents are found invalid in this process, more frequently than not the parties will resolve their differences by settling the claims and counter-claims under an agreement providing for the generics’ entry into the market at a later time.  Some settlements feature “reverse payment agreements” in which the patent holder pays the generic for postponing its market entry.  Others may utilize various licensing or supply arrangements, joint research and development ventures, and agreements prohibiting the brand company from using its market power (and patent holder status) to license “authorized” generics to sell the drug involved in the litigation.

Split in the Federal Courts

The Federal Trade Commission has taken the view that all such agreements are presumptively anticompetitive and violative of the antitrust laws.  Courts have disagreed, however, and federal courts are divided on this question – with the Federal, Second and Eleventh Circuit Courts of Appeal disagreeing with the FTC’s position, and the Third, Sixth and District of Columbia Circuits striking down such patent settlement agreements under the antitrust laws.

The Case to be Reviewed

The Supreme Court has now agreed to hear an appeal from the Eleventh Circuit in which the FTC lost its challenge to a patent settlement agreement between Solvay Pharmaceuticals and generic drug makers Watson, Paddock and Par involving AndroGel®, a topical gel treating the symptoms of low testosterone.  The Circuit Court upheld the settlement agreement, finding that unless the underlying patent litigation was a sham or the patent obtained by fraud, subjecting all such agreements to an “after-the-fact” analysis of whether the patent at issue could have been found invalid at the end of a potentially lengthy litigation process would “impose heavy burdens on the parties and the courts.”

The Supreme Court will now address these issues for the first time, hopefully providing much needed clarity and guidance to all lower courts, the pharma industry and consumers.

Generic Drug Litigation Post-Mensing

In June, 2011 the Supreme Court in Pliva, Inc. v. Mensing, in a very closely watched appeal, found that failure-to-warn claims bought under state law by plaintiffs experiencing adverse events from generic drugs could not bring those claims under the U.S. Constitution’s Supremacy Clause, which makes federal – not state – law the supreme law of the land.  Concluding that FDA regulations enacted under Hatch-Waxman required generic drug labeling to remain “the same as” the brand or innovator drug’s labeling, the Court held that generics were unable to change their labeling under procedures afforded by regulation to brand drug companies alone.

As a result of this broad ruling, almost all products liability cases involving generics were dismissed in state and federal courts throughout the country.  Only in instances in which a generic drug’s labeling failed to conform to the brand’s were those cases kept alive. 

The Case to be Reviewed

Earlier this year, following a $21 million jury verdict in favor of Karen Bartlett, who was permanently injured from a severe Stevens Johnson Syndrome allergic reaction to a non-steroidal anti-inflammatory drug, Sulindac, the trial and appellate courts kept her design defect claims alive against the drug’s manufacturer, Mutual Pharma, a generic, and refused to set aside the verdict.

Mutual appealed to the U.S. Supreme Court, which has now agreed to hear the case to determine if design defect claims against generics survive Mensing.  All of the trial and appellate courts considering this issue following Mensing have held that such claims are no longer viable against generics.  Certain of those courts analyzing the Bartlett decision have rejected its premise that Mensing was limited to failure-to-warn claims only.

The Supreme Court in the coming year will decide what claims, if any, remain available to plaintiffs who take or are administered generic medicines.  The Court’s ruling will determine if products liability suits against generics are as truly dead-in-the-water as they once appeared to be under Mensing.