Settlement agreements in ANDA litigation are typically subject to confidentiality obligations and not publicly disclosed. The terms of those settlement agreements can be of particular interest to competitor generic drug companies that are trying to get the best deal in a later settlement. Occasionally, one party to the agreement must file the agreement with the U.S. Securities and Exchange Commission. The obligation to file the agreement with the SEC arises when the SEC registrant enters into a “material definitive agreement.” (SEC Form 8-K, Instruction Item 1.01.) Those SEC filed agreements can provide useful guidance sometimes related to a particular formulation, but more generally to the kinds of terms one can expect to see in such ANDA settlement agreements. I was able to find a number of such agreements by doing a search at this link – https://www.sec.gov/edgar/search/.
As with any contract, those ANDA settlement agreements will include the standard boilerplate terms and conditions. This note will not address those standard terms.
More interesting are the terms addressing the kinds of rights the parties in ANDA litigation negotiate, such as entry date, pre-marketing activity, and most favored nations treatment.
Entry Date – The entry date (or “Generic Entry Date” / “License Effective Date”) represents the point at which the generic manufacturer is permitted to commercially enter the market under a patent license. Rather than a single fixed date, the agreements typically adopt a multi-trigger structure – often a fixed future date, a favorable or adverse court decision, or a third-party launch. Such a multi-trigger structure is often desirable because it provides (i) the brand some continued period of exclusivity, (ii) the generic an entry date prior to patent expiry, and (ii) some level of comfort to the generic should some external development permit a different generic to launch earlier (e.g., litigation invalidation of the patents).
Pre-Entry Market Activity – One purpose of the Hatch-Waxman Act is to enable the parties to work out the patent issues so that generic competition can start when all exclusivities expire. Similarly, pre-entry market activity enables the generic to undertake some marketing activities in advance of the entry date so that the entry date is actually meaningful (i.e., the generic has contracts in place and product on hand to enter the market). Such pre-entry market activity can include
- Manufacturing and importing product prior to entry
- Notifying customers of future availability
- Making non-binding offers
- Entering into binding contracts shortly before launch.
The main goal of these terms is to enable the generics to be “launch-ready” to ensure immediate competition at entry, but it also enables the brand company to understand how and when its exclusivity in the market will be changing.
Most Favored Nation Clauses – Most favored nation (MFN) provisions ensure that if the brand company later grants more favorable terms to another generic entrant, the settling generic may receive those same improved terms. For instance, an agreement may require the brand to notify the generic of any more favorable license granted to a third party and allows that generic to adopt those terms or that the agreement is automatically amended to incorporate more favorable entry dates or pre-commercialization rights granted to others. MFN clauses are of particular interest to first or early-settling generics to ensure that they are not disadvantaged relative to later settling generics. Such clauses also permit the brand companies to harmonize conditions across multiple generics so that they are all treated similarly.
Other Terms – As noted above, ANDA settlement agreements include many other standard terms – e.g., license (typically non-exclusive and may be royalty-free or royalty bearing); at-risk launch provisions (typically triggered by other unauthorized generic launch); covenants not to sue; releases; patent no-challenge clauses. The terms discussed above, however, seem to be the terms that are given the most attention in settlement negotiations.
If you would like copies of the ANDA settlement agreements that we collected from the SEC site, please let us know.
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