David Vitter: Wrong on Drug Importation. Wrong on Patent Settlements.
This overly vague language of Senator Vitter’s amendment (#628) to the Senate Budget Resolution would ban all forms of patent settlements, including those that the FTC and the courts have not opposed. This would prevent pro-consumer settlements, reduce the value of patents, and reduce incentives for innovation. Instead, enforcement agencies and courts should continue to evaluate patent settlements on a case-by-case basis, under the same antitrust principles that apply to all other patent settlements.
The Supreme Court is currently addressing the issue, and Congress should await the Court’s ruling (likely this June) on the standard for reviewing such settlements.
For the first time the Supreme Court will review a case regarding the antitrust standard that should apply to patent settlements between innovator and generic pharmaceutical companies. Given the complexities and the conflict between the circuits, even if legislators believe that Congressional action may be warranted, consideration of the issue should await the Supreme Court’s decision in the case.
A ban is bad public policy that harms innovation.
Banning Hatch-Waxman patent settlements would increase the cost of patent enforcement, decrease the value of patent protection generally, and decrease incentives for taking the risks necessary to develop new medicines. As one court has stated, “a rule prohibiting settlements of Hatch-Waxman litigation can have grave consequences for R&D and, in turn, severe consequences for consumers.”
A ban would delay generic entry and delay benefits to consumers.
Despite what proponents of the legislation say, statistics show that brand companies have prevailed in approximately 52 percent of patent cases against generic challengers.
A win by the patent holder means the generic almost certainly would not be able to enter the market before the patent expires. In many cases, therefore, settlements accelerate generic entry and provide access to lower cost medicines. According to one generic company’s estimate, settlements on 10 products alone have resulted in more than $67 billion in savings to consumers.
Congress has already given the Federal Trade Commission the ability to review and evaluate individual patent settlements.
Unlike patent settlements in any other industry, Congress in 2003 required that brand and generic companies settling patent litigation arising out of the generic company’s patent challenge must file a copy of their settlement agreement or a written description of it with the FTC and the Department of Justice before the date when the generic product may enter the market. The FTC thus has the power to challenge any agreement that it deems anticompetitive.
A ban on an entire category of settlements is unwarranted. This kind of blanket ban is overly broad and could negatively impact the availability of medicines that help patients live longer, healthier lives.