Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Court declines to grant blanket immunity to certain reverse payment settlements, (Sep 24, 2015)

By Patricia K. Ruiz, J.D.

The ruling in the U.S. Supreme Court’s 2013 decision in FTC v. Actavis, holding that reverse payment settlements can sometimes violate antitrust laws, did not come into play where such a settlement was alleged to illegally delay the entry of a generic drug in the American market. In its decision granting in part and denying in part a drug manufacturer’s motion for summary judgment, the federal district court in Philadelphia held that the purchasers of the drug who challenged the settlements did not establish a proper foundation for the claim that the settlement eliminated the risk of patent invalidation or a finding of non-infringement (In re: Wellbutrin XL Antitrust Litigation, September 23, 2015, McLaughlin, M.).

In May 2008, direct and indirect purchasers of Wellbutrin XL filed claims again SmithKline Beecham Corporation d/b/a/ GlaxoSmithKline and GlaxoSmithKline plc (GSK) and its business partner Bovail Corporation (Bovail), alleging that the companies conspired to prevent generic versions of the drug from entering the American market by filing sham patent infringement lawsuits, filing a citizen petition with the FDA, and entering into agreements with generic manufacturers to settle the lawsuits. The court certified the class of direct purchasers and the class of indirect purchasers but later decertified the indirect purchaser class. GSK moved for summary judgment.

Actavis. In FTC v. Actavis, Inc. (2013), the Supreme Court held that settlements in which the holder of a pharmaceutical patent makes a payment to an alleged patent infringer to resolve a challenge to the patent (reverse payment settlements) can sometimes violate antitrust laws by eliminating the risk of patent invalidation or a finding of non-infringement (the issue in question in the instant litigation). Such settlements are not presumptively lawful or presumptively unlawful, and courts should evaluate settlements under the rule of reason.

GSK moved for summary judgment on the grounds that (1) the Supreme Court’s decision in Actavis does not apply to the Wellbutrin settlement because the underlying patent litigation continued; (2) there is no evidence in the summary judgment record that the Wellbutrin settlement was anticompetitive under the rule of reason; (3) the purchasers failed to make the requisite showings of antitrust injury and causation demanded in private antitrust litigation; and (4) GSK was not a co-conspirator to any alleged anticompetitive scheme.

Applicability of Actavis to the Wellbutrin settlement. The settlement agreements challenged in this case contained a provision not contained in any other post-Actavis case—the generic manufacturer did not abandon its challenge to the patent held by Bovail. The settlement provided that if the generic manufacturer prevailed on its appeal in the Federal Circuit, it could immediately introduce generic Wellbutrin XL to the market. Thus, GSK argues that the settlement does not come into the purview of Actavis and should be exempt from antitrust scrutiny. Reluctant to create blanket immunity for any reverse payment settlement in which the underlying patent litigation continues, the court made the provision a factor to be considered in the rule of reason analysis. However, the purchasers did not establish a proper foundation for the claim that the settlement violates antitrust laws by eliminating the risk of patent invalidation or a finding of non-infringement by showing that an alternate settlement would have been reached absent a “no authorized generic” agreement, or that continued litigation would have resulted in earlier generic entry through an at-risk launch.

Rule of reason. The rule of reason requires an analysis of (1) whether the agreement has anticompetitive effects; (2) if so, whether there are procompetitive justifications for the agreement; and (3) whether the purchasers can present evidence that the challenged conduct is unnecessary to achieve those justifications. The court found no evidence that a settlement without a “no authorized generic” agreement was ever contemplated, much less that it would have resulted in an earlier entry date for the generic. In fact, the summary judgment record shows that the generic manufacturers regarded the “no authorized generic” agreement as an essential term. Thus, the purchasers did not make an adequate showing that a separate patent would not have been an independent bar to market entry. The court also found that a reasonable jury could not find that any anticompetitive effects outweigh the procompetitive benefits of the settlement.

Antitrust injury and causation. GSK argued that the purchasers cannot show antitrust injury or causation because they cannot show that the Wellbutrin settlement, and not the underlying patents, prevented generic entry. In the alternative, the purchasers cannot show that the generic manufacturers could have and would have entered the market at risk. The purchasers argue that the elements of injury and causation are made by their showing of a large payment and a delay, which, they argue, establish anticompetitive conduct as well as injury or causation. However, this argument would eviscerate the rule of reason analysis, the court ruled, and ignore the long-standing and strict principles of antirust injury and causation. Without a showing that the settlement, and not the underlying patents, prevented market entry of the generic and that the generic manufacturers had the ability and intent to launch at risk, the theory could not succeed.

Participation in conspiracy. GSK argued that it was not a co-conspirator because the “common scheme” to which it committed was not “designed to achieve an unlawful objective.” While the summary judgment record does not contain evidence that GSK was a calculating conspirator, the court recognized that GSK went to great lengths to safeguard against antitrust liability. Further, because of GSK’s desire to have a judge approve the settlement and its insistence on enhanced FTC review, a reasonable jury could find that, as a party to the agreement, GSK was a co-conspirator and was not engaging in independent action. Thus, the court denied GSK’s motion for summary judgment on the ground that it was not a co-conspirator.

The cases are Nos. 08-2431 and 08-2433.

Attorneys: David F. Sorensen and Eric L. Cramer (Berger & Montague, PC), Kenneth A. Wexler (Wexler Wallace LLP) and Peter R. Kohn and Sarah Westby (Faruqi & Faruqi LLP) for Rochester Drug Co-Operative, Inc. Dianne M. Nast and Kenneth A. Wexler (Nastlaw LLC) for Professional Drug Company, Inc. Edward D. Rogers, Leslie E. John, Stephen J. Kastenberg, Leslie E. John and Stephen J. Kastenberg (Ballard Spahr Andrews & Ingersoll LLP) for Smithkline Beecham Corp. and Glaxosmithkline, PLC.

Companies: Rochester Drug Co-Operative, Inc.; Professional Drug Company, Inc.; Smithkline Beecham Corp.; Glaxosmithkline, PLC; Bovail Corporation; Actavis, Inc.

Cases: Antitrust PennsylvaniaNews