Supreme Court corner — Q3 2013

In a split decision, the court found the proper judicial review of reverse settlement payments is a ‘rule of reason’ in light of the pro-competition nature of the Hatch-Waxman Act. Justice Breyer, writing for the majority, listed factors that may help to determine whether such a settlement is anticompetitive: size, scale in relation to future litigation costs, independence from other services for which it might represent payment, the industry, and the lack of other justification. The court’s adopted ‘rule of reason’ analysis finds a middle ground between the Second, Eleventh and Federal Circuits (deferential scrutiny), and the Third Circuit (presumptively invalid). This middle ground requires courts to conduct a more thorough anti-competition analysis. Such analysis need not be onerous, and the trial court is not required to reach the validity of the underlying patent(s) in every case.

This decision is likely a win for generic drug consumers, who may now benefit when some generics enter the marketplace sooner. The decision also provides some upside for drug manufacturers: the decision declined to find the settlements in question presumptively invalid, and added clarity for judicial review of such settlements…

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