Reversal of the reverse payment: Third Circuit sends K-Dur back for a “quick look”

The Third Circuit Court of Appeals has reversed the dismissal of an antitrust complaint against Merck & Co. (MRK)’s Schering-Plough. Plaintiffs CVS Pharmacy, Rite-aid, and other wholesalers alleged Schering-Plough had made settlement deals (“reverse payments”) with generic drug producers to “delay competitive entry” in violation of antitrust law.

The lower court dismissed the claim under a “scope of the patent” analysis, and determined that the settlements in question should not be subjected to antitrust scrutiny. The Third Circuit rejected the scope of the patent line of reasoning, stating that the “test improperly restricts the application of antitrust law” by presenting an “almost unrebuttable presumption of patent validity.” The court stated that the need to uphold the policy of encouraging suits against “weak patents” and to protect consumers from “unjustified monopolies” outweighed the “judicial preference for settlement” in this case.

The Circuit Court then directed the district court to replace the scope of the patent analysis with “quick look rule of reason analysis based on the economic realities of the reverse payment settlement.” The court further maintained that any reverse payment settlement should be treated as “prima facie evidence of unreasonable restraint of trade.”

Full content: Opinion (PDF)

Related content: Reverse Payment Settlements: Presumptively Bad or Usually Acceptable?

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