In Re Cardizem and Valley Drug: A View from the Faultline between Patent and Antitrust in Pharmaceutical Settlements
Chaves Mosier, Richard D., Ritcheson, Steven W., Santa Clara Computer & High Technology Law Journal
The line where the patent laws and antitrust laws meet has been described as an "accommodation," (1) an "intersection," (2) an "impact," (3) a "clash," (4) and, here, a faultline. This case note reveals that faultline within the context of two recent court decisions that analyze antitrust claims brought against parties to patent settlement agreements involving the Hatch-Waxman Act, 21 U.S.C. [sub section] 301-99. Specifically, we examine the seemingly contradictory decisions of the Sixth Circuit's opinion in In re: Cardizem CD Antitrust Litigation and the Eleventh Circuit's opinion in Valley Drug Co. v. Geneva Pharmaceuticals, Inc.
In re: Cardizem CD Antitrust Litigation (5) pitted Hoescht Marion Roussel, Inc. ("HMR"), the producer of Cardizem CD--a highly profitable brand-name prescription drug used for treating angina and hypertension and preventing heart attacks and strokes--against Andrx Pharmaceuticals, Inc. ("Andrx"), a manufacturer of generic drugs. On June 13, 2003, the United States Court of Appeals for the Sixth Circuit ("Sixth Circuit") held an agreement entered into between HMR and Andrx as per se illegal under antitrust laws. The agreement provided that Andrx, in exchange for quarterly payments of $10 million, would refrain from marketing any generic version of HMR's Cardizem CD even after Andrx had received Food and Drug Administration ("FDA") approval. (6) In finding this agreement was a per se violation, the Sixth Circuit answered in the affirmative, and thereby functionally affirmed, a question that was certified for interlocutory appeal by the United States District Court for the Eastern District of Michigan. (7)
Rejecting the Sixth Circuit's holding in Cardizem, the United States Court of Appeals for the Eleventh Circuit ("Eleventh Circuit") reached a seemingly contrary conclusion in Valley Drug Co. v. Geneva Pharmaceuticals, Inc. (8) On September 15, 2003, the Eleventh Circuit held that two separate agreements between Abbott Laboratories, the manufacturer of a name-brand hypertension drug, and generic drug manufacturers Zurich Goldline and Geneva Pharmaceuticals, were not per se illegal even though the agreements involved payments to the generic manufacturers in exchange for their agreements not to enter the market. (9) The Eleventh Circuit found that the district court had failed to consider the fact that, as a patent-owner, Abbott had a lawful right to exclude potential infringers from practicing its patents. On remand, the district court was instructed to analyze whether the agreements unlawfully exceeded this right. (10)
In this casenote, Part II provides a brief background of the Hatch-Waxman Act. In Part III, the facts of the two cases are set out at greater length. Finally, in Part IV, we take a closer look at the faultline between patent and antitrust law and the apparent clash between the Sixth and Eleventh Circuits. We then suggest a framework for analyzing these types of cases in light of our view that both circuit courts may well have reached the correct conclusion, but via the wrong procedure.
II. THE HATCH-WAXMAN ACT
A company seeking to market a pharmaceutical drug in the United States must first obtain approval from the FDA. (11) Ordinarily, applications for FDA approval are filed as a new drug application ("NDA"), in which the applicant must provide test data sufficient to demonstrate that the drug is safe and effective. (12)
Prior to 1984, the NDA was the only method of obtaining FDA approval for a new drug, even for those who wished to make a generic version of an approved drug having identical active ingredients. This procedure was both time consuming and inefficient, and potentially exposed the applicant to a claim of patent infringement if the new drug was the subject of a patent. (13) These hurdles made it difficult if not impossible for generic drug manufacturers to bring their products to market. …