Third Circuit Issues Key Ruling Regarding "Reverse Payment" Settlement Agreements
July 18, 2012

On July 16, 2012, the Third Circuit issued a key ruling in In re K-Dur Antitrust Litigation regarding so-called “reverse payment” settlement agreements, which are not uncommon in the pharmaceutical industry. In these types of agreements, a generic drug company agrees to drop its challenge to a brand drug company’s patent and refrain from entering the market for a specified period of time in exchange for a payment by the brand drug company to the generic drug company.

The Third Circuit ruled that such “reverse payments” are prima facie evidence of an unreasonable restraint of trade, which may result in a violation of the antitrust laws. This ruling causes a split among the circuit courts that have addressed this issue and is directly contrary to rulings from the Second, Eleventh, and Federal Circuits. Going forward, litigants and parties to a proposed or executed agreement should be very mindful of the regional law that applies to such agreements, because the legality of the agreements may depend on the choice of law applied to it. Given the split in circuits, however, we would not be surprised if the Supreme Court later considers this issue and resolves the competing decisions.

If you have any questions or wish to discuss how the Court's decision may impact your company, please contact your attorney at Brinks Gilson & Lione, or one of our BioPharma attorneys.

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