A US District Court has refused an application by Cephalon to dismiss a case brought against it by the FTC in relation to the settlement of a patent dispute between Cephalon and would-be generic manufacturers of Provigil (modafinil), a drug used in the treatment of sleep disorders which recorded $961 million in sales in 2009 alone.
Following applications in 2002 by a number of pharmaceutical companies to the US Food and Drug Administration to manufacture generic versions of Provigil, Cephalon commenced proceedings alleging that the generic products would infringe its patent relating to modafinil. In response, the generic companies claimed that the patent was invalid and should be revoked. The proceedings were ultimately settled on terms which provided for Cephalon to pay the generic companies a combined total of more than $200 million in return for the generic companies abandoning their challenge to the Cephalon patent, and agreeing not to launch a competitive generic product until 2012.
The FTC has indicated that in its opinion, these “reverse payment patent settlements” delay generic competition and artificially maintain the high cost of medicine to the community.
In the current proceedings brought by the FTC against Cephalon, the FTC alleges that that the settlement in relation to modafinil was anti-competitive and in breach of anti-trust provisions. It is Cephalon’s position that as the settlement does not in fact restrict competition to any greater extent than the patent itself, it does not breach anti-trust law.
While Justice Goldberg of the US District Court for the Eastern District of Pennsylvania did not consider that settlements of this kind violate anti-trust legislation per se, he accepted that the arrangement may be anti-competitive and in breach of US anti-trust legislation to the extent that it creates greater rights than are conferred by the granted patent. Consequently, the proceedings against Cephalon will continue.
The case will be one to watch as there is currently no precedent for examining these “reverse payment patent settlements”. As noted by Justice Goldberg it will be the Court’s task to “strike the proper balance between competing patent and anti-trust principles”.
