FTC v. Watson Pharmaceuticals

Whether reverse-payment agreements between brand-name and generic drug manufacturers are per se lawful or presumptively anticompetative and unlawful.

The United States licensee of AndroGel, a topical synthetic testosterone, (Licensee), filed a patent infringement action against Respondents who manufacture an FDA-approved generic form of AndroGel. Prior to the infringement decision, Licensee agreed to pay Respondents to delay introducing their product for several years, and terminated its suit. When the Federal Trade Commission (FTC) discovered this “reverse-payment agreement” (RPA), it filed an antitrust action, arguing that the RPA was an unlawful agreement not to compete in violation of the Federal Trade Commission Act, 15 U.S.C. § 41 et seq., because the Licensee was unlikely to prevail in the underlying infringement action.

The district court granted Respondent’s 12(b)(6) motion to dismiss and the Court of Appeals for the Eleventh Circuit affirmed, holding that RPAs are lawful so long as the anticompetitive effects of the settlement fall “within the scope of the exclusionary potential of the patent” and that the unlikelihood of the underlying infringement suit was insufficient to give rise to an antitrust claim.

The Supreme Court granted certiorari to resolve a circuit split on the legality of RPAs. On review, the FTC argues that RPAs are unlawful restraints on trade because they allow for brand name and generic drug companies to be partners in a monopoly and act to delay the introduction of generic medications which leads to higher prices for drugs.