On February 2, 2009, the Federal Trade Commission filed an antitrust challenge to yet another patent infringement litigation settlement agreement between a pharmaceutical patentholder and the alleged infringers. This new action is remarkable because it illustrates the FTC’s strategy of choosing the federal courts over FTC administrative litigation in order to seek Supreme Court review.

The FTC joined the State of California in filing this antitrust complaint in the Central District of California, challenging pharmaceutical settlement agreements and related transactions between a patentholder, Solvay Pharmaceuticals, and three generic drug firms that brought challenges to the Solvay patent: Watson Pharmaceuticals, Par Pharmaceutical Companies, and its partner Paddock Laboratories. The patent litigation involved AndroGel, one of multiple products available for testosterone replacement. The complaint alleges that Watson, Par, and Paddock accepted compensation through co-promotion agreements and back-up supply agreements in exchange for delaying until 2015 their own generic entry into the market. The Solvay formulation patent at issue in the underlying patent litigation expires in 2020. The Commission alleges that the generic companies essentially traded entry earlier than 2015 for the compensation they would receive through the co-promotion and back-up supply agreements.

As it must in such a challenge, the FTC alleges that the generic companies likely would prevail in the patent litigation or enter earlier through at-risk launches, in the absence of their agreement to settle. To square the circle, the Commission further alleges that the generic companies would not have been willing to settle the litigation absent the co-promotion and back-up supply agreements.

The FTC normally has not brought such antitrust challenges in federal court, instead proceeding in its own administrative litigation process. However, recently the federal court route has become the FTC’s choice in patent settlement cases. Last year, the FTC opted to go directly to the federal district court in Washington, DC, to challenge patent litigation settlements involving Cepahlon’s wakefulness product, Provigil. That court almost immediately transferred the case to the Eastern District of Pennsylvania, where private antitrust challenges to the same settlement agreements already were pending.

The FTC and private plaintiffs both have lost a number of antitrust lawsuits against pharmaceutical patent litigation settlements. In choosing to litigate in federal court and in federal circuits of its own choosing, the FTC’s apparent objective is to initiate a split of opinion among the circuits that will require Supreme Court resolution. The bigger the split, the more likely there will be Supreme Court review. This is not possible if the FTC brings an administrative action, as defendants that lose there can appeal to any federal appellate court, depriving the FTC of the ability to create a circuit split.

In the Solvay case, neither the facts nor the theories are new, only the forum. Although in the past the FTC has entrusted these matters to its own alleged administrative litigation expertise, to create the appellate opportunity it seems willing to turn to the federal courts that have found such agreements legal time and again.

The four current members of the Commission were unanimous in authorizing this complaint. The complaint, press release and concurring statement of Commission Leibowitz are available at the FTC's website.