FTC v. Actavis and the Future of Reverse Payment Cases

The Supreme Court ruled in FTC v. Actavis that reverse payment settlement agreements between branded and generic pharmaceutical companies are subject to antitrust scrutiny and should be analyzed under the traditional, but not necessarily full-blown, rule-of-reason. The Court’s decision represents a significant victory for the Commission because it brings these agreements firmly within the scope of the antitrust laws and rejects the “scope of the patent” test. A critical next step is to begin to answer the important questions left open by Actavis. For instance, what legal burdens and presumptions will lower courts apply when analyzing reverse payment settlement agreements under the rule-of-reason? What benchmarks will lower courts use to assess whether a reverse payment is “large and unjustified” and thus carries a significant risk of anticompetitive effects. Although the Supreme Court rejected a general presumption of illegality, might lower courts adopt case-specific presumptions based on general evidence about particular types of reverse payment agreements? What role will patent validity play in the analysis, and what new efficiency justifications might courts accept?