WASHINGTON — Several Supreme Court justices expressed skepticism on Monday about the legality of payments by brand-name drug companies to potential generic competitors in exchange for keeping their cheaper, rival drugs off the market.
Some justices seemed inclined toward a narrow ruling, one that would not create a broader precedent, or a ruling that could leave to a district court judge a decision on whether such payments violate antitrust law, based on the particular facts of a case.
The arguments and questions came in Federal Trade Commission v. Actavis, No. 12-416. In the case, the F.T.C. charged that a payment by Solvay Pharmaceuticals, the holder of a patent on a testosterone gel known as AndroGel, to Actavis represented an unlawful restraint of trade because it was intended to keep Actavis from producing its generic version of AndroGel for a certain number of years.
That also raises the cost that consumers pay for prescription drugs, the agency argued.
In a standard patent infringement lawsuit, a settlement payment would be made by an infringer to the patent holder. Solvay’s deal with Actavis is known as a reverse-payment agreement because payment flows from the brand-name drug company to the generic competitor that is challenging the patent.
Few justices seemed interested in the legal theory put forth by Actavis and other drug companies that such payments were legal as long as they were within “the scope of the patent” — that is, as long as the delay in the market entry of the generic company’s drug did not extend beyond the expiration of the brand-name company’s patent.
The 11th Circuit Court of Appeals upheld that rule in a 2012 decision that the F.T.C. was appealing. Last year, the F.T.C. won a reverse-payment case before the Third Circuit Court of Appeals; the conflicting decisions brought the issue before the Supreme Court. Eight justices heard arguments on the case on Monday, presenting the possibility that the court could split 4-4. Justice Samuel A. Alito Jr. recused himself from the case; as is common practice, no reason was given.
The justices focused on the economic effects of the deals. Justice Ruth Bader Ginsburg, for example, noted that the payments seemed to allow a generic company to earn more profits by agreeing to stay off the market than it could earn if it successfully challenged a patent and sold its generic copy of the drug.
“That was my concern, too,” said Justice Anthony M. Kennedy. “What the brand company can lose is much greater than what the generic can make. So why don’t you just put a cap in what the generic can make and then we won’t have a real concern with restraint of trade, or we’ll have a lesser concern.”
He added: “If you key your payment to what the brand company will make,” as the deals often appear to do, “it’s just a much higher figure and a greater danger of unreasonable restraint.”
The stakes in the dispute are huge. Pharmaceutical sales in the United States totaled roughly $320 billion in 2011, according to IMS Health, a research company whose statistics the agency cites in its arguments.
Brand-name drugs accounted for 18 percent of the total prescriptions written by doctors in 2011 but 73 percent of consumer spending, IMS reported. When a generic version of a brand-name drug comes onto the market, the F.T.C. said, it costs about 15 percent of the original, causing the brand-name drug maker to quickly lose about 90 percent of its market share.
Congress saw the difference that generic drugs could make in health care spending when in 1984 it passed the Drug Price Competition and Patent Term Restoration Act, also known as the Hatch-Waxman Act.
That law, with amendments passed roughly 20 years later, encouraged generic drug makers to challenge the patents protecting lucrative brand-name drugs.
The reverse payment trend resulted from a sort of loophole in the Hatch-Waxman law, and at least two justices indicated they were either reluctant to fix that problem for Congress or they did not want any solution to apply broadly to nongeneric drug patent cases.
Justice Antonin Scalia laid the blame on Congress. “I have a feeling that what happened is that Hatch-Waxman made a mistake,” he said. “It did not foresee that it would produce this kind of payment.”
But that was not the court’s problem, Justice Scalia added. “Why should we overturn understood antitrust laws,” he asked, “just to patch up a mistake that Hatch-Waxman made?”
Justice Stephen G. Breyer also probed for a limited-scope solution, including letting a Federal District Court judge decide whether a reverse payment appeared to unlawfully restrain trade.
Both Justice Sonia Sotomayor and Justice Elena Kagan said that the consumers were obvious losers when drug companies made reverse payments to settle a patent case.
“It’s clear what is going on here,” Justice Kagan said, “is that they’re splitting monopoly profits, and the person who’s going to be injured are all the consumers out there.”