When is it fair to slap a 'pay for delay' label on a patent settlement?

Are antitrust regulators unfairly targeting Big Pharma's patent settlements? As the debate rages on--and continues to spread--more experts and pharma execs are pushing back, the Financial Times reports.

In the U.S., the Supreme Court is weighing one key case as federal regulators eye several others. In Europe, antitrust authorities continue their years-long probe, with formal cases against several drugmakers. And now, in the U.K., officials have stepped in with accusations against GlaxoSmithKline ($GSK).

In Glaxo's case, the country's Office of Fair Trading alleges that the company abused its dominant market position with an agreement with three companies that wanted to sell copies of its antidepressant paroxetine, marketed as Paxil. GSK says European watchdogs already looked at the patent settlements in question and declined to pursue a case against the company. And the company echoed previous pharma comments about patent settlements--namely, that they often get generics to market before patents would have officially expired.

That contention is open to debate; as some experts point out, it all depends on the strength of the patent involved. Branded drugmakers may deserve to lose certain patents because the case for them was weak in the first place. But in other cases, branded drugmakers may give a little on valid patents to dispense with legal chores.

GSK chief Andrew Witty says settlements dubbed "pay for delay" are often unfairly deemed so. "I push back at the description of pay for delay," he said (as quoted by the Financial Times). "It's a very convenient label people have chosen to use," he adds, but a patent settlement often not only makes generics available, but also "achieves the elimination of uncertainty for both sides."

That's not a new argument. But as IP expert Jason Rutt told the FT, it can actually be true. "The patent holder may be 75% certain he'll win, but losing is a disaster," Rutt points out. "The patentee is also probably under pressure from shareholders to give some certainty around future earnings. So he compromises, agrees to a pay for delay settlement and the generics get on the market a bit earlier. The U.S. patient gets a break he probably wouldn't have got had litigation been seen through."

Though he himself uses the pay for delay phrase, Rutt echoed Witty's dislike of it. "I hate the term," he said. "It makes settlements seem like the pharma version of Danegeld, with innovators paying money to make marauding generic Vikings go away without a fight. In practice, it's the bitterly contested resolution of some fairly brutal, red-in-tooth-and-claw litigation."

The question now, in the U.S., at least, is what the Supreme Court decides on the issue. That ruling is expected later this year. But the court's decision may not end up settling the question; some experts figure on a narrow ruling that avoids setting a wider precedent.

- see the FT column