The Federal Trade Commission (FTC), private class action plaintiffs and European regulators have intensified their focus on so-called ‘reverse-payment settlements’ since FTC v. Actavis opened up certain of these agreements to antitrust scrutiny in 2013. Reverse payment settlements are those in which: (i) a patent holder (typically a brand pharmaceutical company) grants a licence to the alleged patent infringer (typically a generic pharmaceutical company) to market its generic product beginning on a future date certain; and (ii) the patent holder makes a payment to the alleged infringer.

The US Supreme Court in Actavis generally held that these settlements are subject to antitrust scrutiny if they involve a “large and unjustified payment” to the generic company in exchange for delaying the launch of its generic product (133 S. Ct. 2223, 2234, 2237 (2013)). Courts and commentators continue to debate how to analyse an existing settlement under this nebulous standard.

But what does the decision mean for a pharmaceutical company in the process of settling a patent dispute? What can in-house counsel do to increase their company’s chances of avoiding government investigation or the ever-expanding morass of reverse payment class action litigation? There are several aspects of a reverse payment settlement that should be negotiated and drafted with Actavis in mind.

Below is a list of suggestions on what to look for in doing so.

Apr-Jun 2015 issue

O’Melveny & Myers LLP