ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, June 19, 2013

Pay-to-Delay Agreements and the Supremes

On Monday, the U.S. Supreme Court  issued a ruling in Federal Trade Commission v. Actavis that permitted the Federal Trade Commission to sue pharmaceutical companies for potential antitrust violations when they enter into “pay-to-delay” agreements.  (Lyle Denniston of SCOTUSblog has a good analysis here ).  These agreements are a type of settlement agreement where a pharmaceutical company pays a generic drug company to keep the drug off the market for a certain period of time.  Lower court rulings had held that these agreements were valid as long as they did not exceed the term of the patent held by the pharmaceutical company.  This should be an interesting case for contractsprofs because it is a high profile "limits of contract" case.  In an era where judges have been notoriously reluctant to interfere with freedom of contract even when it hurts consumers, this case is a refreshing change. 

I’m curious though what will happen to the payments that were made to the generic drug companies – are the agreements rescinded and the payments returned?  (I haven’t read the decision thoroughly yet to see whether it’s indicated). That might be a problem for the generic drug companies.  It seems like some sort of restitution should be made - I wonder if the parties thought of putting a provision addressing what would happen in the event of illegality in their agreement?

[Nancy Kim]

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