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FTC v. Watson Pharmaceuticals: Another Piece Of The Puzzling Marketplace For Health Care Innovation


December 21st, 2012

It is too soon to tell whether deciding the fate of national health reform last year in National Federation of Independent Business v. Sebelius has generally emboldened the U.S. Supreme Court to resolve legal uncertainties affecting the health care system. Nonetheless, 2012-2013 will be a busy year on this front for the Justices, who have already heard or agreed to hear seven relevant cases, including three involving the pharmaceutical industry. The first six cases are FTC v. Phoebe Putney Health System, Inc. (hospitals and the “state action” exemption from antitrust liability); Sebelius v. Auburn Regional Medical Center (Medicare reimbursement for hospitals); Association for Molecular Pathology v. Myriad Genetics, Inc. (patenting of human genes), on which we wrote earlier at Health Affairs Blog; Mutual Pharmaceutical Co. v. Bartlett (state tort liability for drug injury), Sebelius v. Cloer (the National Vaccine Injury Compensation Program), and U.S. Airways, Inc. v. McCutchen (ERISA and insurance companies’ rights to recover tort settlements).

On December 7, the Supreme Court announced its decision to review the seventh and latest addition to the list, FTC v. Watson Pharmaceuticals. The Court will look to resolve a disagreement between federal appeals courts over the legality of so-called “pay for delay” or “reverse payment” settlements, in which a settlement payment flows from a patent holder to an accused infringer rather than, as might normally be expected, the other way around. Specifically, the Supreme Court will receive briefs and hear arguments regarding “[w]hether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).”

In answering this question, the Court will influence a much larger debate over innovation in health care markets. Watson Pharmaceuticals’ piece of that puzzle will lie at the intersection of patent law, antitrust law, food and drug law, and civil procedure. We hope that the Court’s review and judgment will improve our collective capacity to apply these legal tools, but we also think it very unlikely that the Court will rule definitively on any of them.

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A Cure For Patent Pathology? The Supreme Court Reviews The Patentability Of Human Genes


December 7th, 2012

“Are human genes patentable?” On November 30, 2012, the U.S. Supreme Court agreed to answer this single question in Association for Molecular Pathology v. Myriad Genetics. Of course, the petitioners, including health care providers, professional associations, and patients, worded the question to favor the answer they want: “No, human genes are not patentable.” For Myriad Genetics, the patent owner who would like its patent rights upheld, the question is better phrased as whether one can patent “isolated molecules of deoxyribonucleic acid that were identified and defined by human inventors.”

The practical stakes in the Court’s decision, which should come in the first half of 2013, are enormous. The U.S. Patent and Trademark Office (USPTO) has issued tens of thousands of patents on genetic sequences over the past few decades, and the U.S. Court of Appeals for the Federal Circuit, the appellate court entrusted with hearing virtually all U.S. patent appeals, has never declared such sequences to be non-patentable subject matter. For more than a century, patents have issued on isolated versions of naturally occurring substances other than DNA.

Many believe that gene patents are crucial to the modern biotechnology industry. On the other hand, many researchers and clinicians feel that gene patents, particularly human gene patents, are commonly unnecessary to spur innovation and in fact interfere significantly with scientific and technological progress, whether by slowing or diverting research, impeding the provision of diagnostic tests, or generally increasing costs for clinical and scientific work.

The patents at issue in Myriad make such concerns particularly poignant. These patents relate to BRCA1 and BRCA2, genes associated with a predisposition to breast cancer. The obvious public interest in ready access to cancer diagnosis helps account for the fact that petitioners’ lead lawyers are not the normal high-priced advocates for a private company accused of patent infringement. Instead, those lawyers work for the American Civil Liberties Union Foundation, an organization more commonly associated with battles for civil rights than rights in technological innovations.

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