Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Expert opinions allowed in long-running Provigil suit, (Oct 8, 2015)

By Jody Coultas, J.D.

Challenges to expert opinions for failing to consider or opine upon subjective intent, qualifications, and the reliability and fit of these experts’ opinions were insufficient for the federal district court in Philadelphia to exclude the opinions (King Drug Company of Florence, Inc. v. Cephalon, Inc., October 5, 2015, Goldberg, M.). The motion to preclude expert opinions regarding Cephalon, Inc.’s litigation uncertainty was granted.

Direct purchasers of the sleeping disorder medication (modafinil) sold under the brand name Provigil, filed a series of class action suits against pharmaceutical manufacturer Cephalon and four generic drug manufacturers for anticompetitive conduct and monopolization by delaying generic competition to Provigil in violation of Sections 1 and 2 of the Sherman Act. The purchasers claimed that the manufacturers engaged in restraint of trade by entering into reverse payment settlements to resolve patent infringement suits, thereby delaying generic competition for Provigil.

The direct purchasers challenged the defendants’ experts’ failure to consider the subjective intent of the persons that executed the settlement agreements in question, and were attempting to convince the jury through the objective economic analyses performed by the experts that the settlements were motivated by certain economic factors, despite the fact that these experts never reviewed evidence on the defendants’ subjective intent.

The court previously held that the direct purchasers met the standard for presenting evidence of anticompetitive effects under a rule of reason analysis set forth in FTC v. Actavis, Inc., 133 S.Ct. 2223 (2013), 2013-1 Trade Cases ¶78,419. The majority of the challenged expert testimony fit the framework set out in the previous order regarding the burdens of proof in an Actavis trial. Despite the insistence that several of the opinions be excluded for failing to consider the defendants’ subjective intent, expert testimony on the defendants’ subjective reasons for entering into the settlement agreements will not be offered, and was inadmissible. Expert testimony regarding “state of mind” is “impermissible.” Therefore, the court declined to exclude the expert opinions on this issue.

Opinions regarding the patent holder’s litigation uncertainty did not meet Daubert’s fit requirement and were excluded by the court. Plaintiffs argued the opinions that the reverse payments were made to avoid litigation uncertainty were contrary to the holding of Actavis, and did not fit the facts of the case. Opinions that the reverse payments were made to avoid Cephalon’s “litigation uncertainty” were irrelevant for the purposes of explaining or justifying the reverse payments because a patent holder’s litigation uncertainty cannot justify a reverse payment. Other procompetitive justifications for the reverse payment, such as “avoided litigation costs or fair value for services” were not inadmissible, however.

The generic defendants could present expert testimony regarding their own litigation uncertainty in providing procompetitive justifications for the reverse-payment settlements as it was relevant, according to the court. When denouncing the avoidance of patent invalidation as a procompetitive justification, the Actavis court focused its comments towards the patent owner, not the generic/alleged infringer.

The challenged experts’ analyses were largely derived from the economic information available to the defendants at the time of the settlement agreements, and those experts opined on what a rational, objective actor would have considered in light of that information. Objective economic analysis of the settlement agreements and the various business deals executed alongside these agreements fit the rule of reason framework applicable in this case and did not offend the standards set forth in Daubert. Also, the experts made clear that they did not consider any privileged information in forming their opinions, and would not be permitted to opine as to the defendants’ subjective intent. Thus, no privileged information had been utilized, or put “at issue” as argued by the plaintiffs, according to the court.

Finally, the court declined to exclude evidence on the procompetitive merits of settlement, so long as it was not offered to establish that the reverse payment was in any way connected with avoiding the risk of patent invalidation or a finding of noninfringement. The plaintiffs urged that testimony opining that generally settlement was procompetitive did not fit the facts of the case under Actavis because what was relevant was whether the challenged payments were procompetitive. A jury would have to determine why each Defendant entered into its respective settlement agreement. General background on patent litigation, the Hatch-Waxman framework, and the adverse effects that litigation may have on businesses could provide the jury with context for answering these questions.

The cases are Nos. 2:06-cv-1797, 2:06-cv-1833, and 2:06-cv-2768.

Attorneys: Andrew William Kelly (Odom & Des Roches LLP), Bruce E. Gerstein (Garwin Gerstein and Fisher L.L.P) and Daniel Berger (Berger & Montague, P.C.) for King Drug Co. of Florence, Inc., J M Smith Corp., Rochester Drug Co-Operative, Inc. and Burlington Drug Co., Inc. Allen D. Black (Fine, Kaplan & Black) for Meijer, Inc. Emily R. Whelan (Wilmer Cutler Pickering Hale & Dorr LLP) for Cephalon, Inc. C. Fairley Spillman (Akin Gump Strauss Hauer & Feld LLP) and Daniel P. Margolskee (Cravath Swaine & Moore LLP) for Mylan Laboratories, Inc. Gregory L. Skidmore (Kirkland Ellis LLP) for Teva Pharmaceutical Industries, Ltd. Christopher K. Diamond (Venable LLP) for Ranbaxy Laboratories, Ltd. Erin C. Dougherty (Montgomery McCracken Walker & Rhoads, LLP) for Barr Pharmaceuticals, Inc.

Companies: King Drug Co. of Florence, Inc.; J M Smith Corp.; Meijer, Inc.; Rochester Drug Co-Operative, Inc.; Burlington Drug Co., Inc.; Cephalon, Inc.; Mylan Laboratories, Inc.; Teva Pharmaceutical Industries, Ltd.; Ranbaxy Laboratories, Ltd.; Barr Pharmaceuticals, Inc.

Cases: Antitrust PennsylvaniaNews