Court opens door to review of 'pay for delay'

A U.S. appeals court has affirmed a so-called "pay-for-delay" patent settlement between Bayer and Teva Pharmaceutical Industries (NASDAQ: TEVA), citing legal precedent. But the three-judge panel says applicable law might need to be revisited. It invited the original plaintiffs in the case--which include drug purchasers such as CVS Caremark--to ask for a rehearing by the entire Second Circuit Court, thus opening the door to a new legal approach.

U.S. and European officials have been dogging these patent settlements, in which a branded drugmaker pays a generics firm to keep cheap copycat meds off the market. European antitrust regulators have been investigating an array of patent settlements among such drugmakers as GlaxoSmithKline (NYSE: GSK) and Sanofi-Aventis (NYSE: SNY) on one side and Teva and its ilk on the other. On this side of the Atlantic, the FTC has been challenging the deals at every opportunity, saying that they cost taxpayers billions every year.

In the appeals panel's view, a previous case involving the drug Tamoxifen puts the law in drugmakers' favor. So, the purchasers that brought this suit against Bayer and Teva can't advance their claims. But perhaps the precedent needs reconsideration, the panel acknowledged. "We believe there are compelling reasons to revisit Tamoxifen with the benefit of the full court's consideration of the difficult questions at issue and the important interests at stake," the ruling states.

Not surprisingly, the FTC said it welcomed the ruling: "This is further evidence that courts are rethinking their approach to pay-for-delay settlements," Chairman Jon Leibowitz said in a statement. Whether that rethinking ends up going in the FTC's favor, however, is still an open question.

- see Leibowitz's statement
- read the opinon
- read the Reuters coverage
- get more from Dow Jones
- see the legal analysis at IP Watchdog