Teva is taking a cautious approach in its patent settlements with brand firms - inking deals that meet the strict standards of pending legislation even as the bills are still under debate.

"All the settlements that we have just recently done ... have all been date of entry settlements, which would be legal within the toughest of the provisions that are offered out there today," Teva North America CEO Bill Marth said on the firm's second quarter earnings call July 28.

Teva has inked settlements over the last year on patent disputes related to AstraZeneca's asthma product Pulmicort Respules (budesonide), Medicis' acne treatment Solodyn (minocycline) and, most recently, J&J's contraceptive Ortho Tri-Cyclen Lo .

Each of the settlements gives Teva a date certain that it can launch an authorized generic with a reasonable assurance of exclusivity, but do not appear to include any "reserve payments" of the sort that have caused consternation among lawmakers and the Federal Trade Commission.

"We're just reacting to the market," Marth said. "There are many settlement bills ... within both the Senate and the House ... which have had a chilling effect on settlements today."

Settlement Ban May Be Attached To Health Reform

The health care reform legislation that cleared the House Energy and Commerce Committee July 31 contains an amendment from Rep. Bobby Rush, D-Ill., that would prohibit settlements that provide the generic firm with anything of value aside from an early date of entry (¹ Also see ""Pay For Delay" Legislation Gaining Speed" - Pink Sheet, 31 July, 2009.).

Both the brand and generic trade associations oppose the provisions, but they appear to have a reasonable chance of being included in any eventual health care reform, especially because one of the key Senate proponents - Bill Nelson, D-Fla. - sits on the Finance Committee, which is still drafting its bill (² Also see "The Shadow Of 2003: Hatch/Waxman Changes May Join Health Reform Bills" - Pink Sheet, 13 July, 2009.).

Nelson is co-sponsoring a bill, S. 1315, with Sen. Herb Kohl, D-Wisc., which would go further than the House legislation and force first generic filers to forfeit sole exclusivity if they settle with the brands (³ 'The Pink Sheet,' July 13, 2009). Long advocated by the generic firm Apotex, and endorsed by AARP, the legislation is touted as the only way to ensure an end to collusive settlements by allowing subsequent filers to come to market if they succeed in court.

Teva's confidence in its ability to settle despite a potential ban on payments would seem to support that argument, but Marth noted that "whatever the rules that are put in place by the government or the FTC, the market will adapt to that and that's what we're doing."

At-Risk Launches Are A Safe Bet

Each of Teva's recent settlements also followed an at-risk launch of the generic, which Marth cited as a critical factor in getting the deals.

"If the rules stay with a bright line with date of entry settlement, it almost seems like Teva will be about the only company that can settle because we can launch at-risk. We do launch at-risk and then we [get] a date of entry settlement."

Teva's massive size and Barr-bolstered balance sheet allow it to shoulder the financial and legal dangers of an at-risk launch much better than smaller firms (⁴ Also see "Teva’s At-Risk Launch Of Pulmicort Generics May Cost It Exclusivity" - Pink Sheet, 24 November, 2008.), although its attempt to use the strategy against Lilly's osteoporosis drug Evista (raloxifene) was blocked in court earlier this year (⁵ Also see "Limited Launch Of Teva’s Generic Evista Rejected By Court" - Pink Sheet, 23 April, 2009.).

Despite the firm's adaptability, Marth said that "we're looking for a settlement bill that really is right for the American consumer and we don't think a bright line bill is right for the American consumer."

While Teva seems prepared for whatever the settlement climate may bring, Mylan seems to be taking more of a watchful waiting approach.

Asked during the firm's July 30 earnings call how settlement legislation might impact the industry, CEO Robert Coury said only that "I think it's going to be truly a roll of the dice whether the patent settlement ends up becoming a part of that health care reform."

- M. Nielsen Hobbs ( ⁶ n.hobbs@elsevier.com )

Teva Settlements Stick To Date of Entry Even As Legislative Debate Continues

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