Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Actavis reasoning extends to cases where patent litigation continues, FTC argues, (Mar 14, 2016)

By Greg Hammond, J.D.

The federal district court in Philadelphia erred in concluding that the Supreme Court’s rule of reason principles in FTC v. Actavis, Inc., 133 S. Ct. 223, 2013-1 Trade Cases ¶78,419, do not apply to a reverse payment agreement in which the parties did not settle the underlying patent litigation, the FTC claims in an amicus brief that is before the U.S. Court of Appeals in Philadelphia (In re Wellbutrin XL Antitrust Litigation, Case Nos. 15-3559, 15-3591, 15-3681, 15-3682).

In May 2008, purchasers of Wellbutrin XL filed claims against SmithKline Beecham Corporation, GlaxoSmithKline plc (GSK), and its business partner Biovail Corporation (Biovail), alleging that the companies conspired to prevent generic versions of the drug from entering the American market by, in part, filing sham patent infringement lawsuits and entering into agreements with generic manufacturers to settle those lawsuits. The district court granted the defendants’ motion for summary judgment, finding that no reasonable jury could find the challenged reverse payment agreement unlawful. Specifically, the court interpreted Actavis to have adopted a “limited definition” of the competitive harm that justified antitrust scrutiny of reverse payments, concluding that Actavis did not apply to the reverse payment settlement at issue because the patent challenge continued. The settlement therefore maintained the risk of a finding of patent invalidity or non-infringement, the lower court determined.

The FTC’s brief identifies four fundamental legal errors in the district court’s rule of reason analysis.

First, the FTC argues that the lower court incorrectly concluded that the settlement challenged in the instant action did not present the type of anticompetitive harm contemplated by Actavis because the underlying patent litigation continued. However, Actavis teaches that a reverse payment is likely to be anticompetitive if it shares monopoly profits to “prevent the risk of competition,” the brief asserts. This concern, according to the Commission, exists when a reverse payment induces a generic challenger to defer entering the market while the patent case is pending.

Second, the lower court found that the plaintiffs could show an antitrust violation under the “traditional rule of reason” only if they proved that the Wellbutrin settlement actually resulted in the delayed entry of Wellbutrin XL into the market. However, the FTC claims that the rule of reason inquiry considers whether the nature of the restraint is likely to harm competition. It requires no showing of actual delayed entry or injury to a specific party to establish an antitrust violation.

Third, the FTC argues that the lower court erred when it credited the defendants’ alleged procompetitive justifications without requiring them to explain how the benefits are attributable to the reverse payment. The brief states that it is implausible that Teva would have required a payment to accept beneficial terms, or that GSK would have paid Teva to accept such benefits.

Lastly, the Commission claims that the lower court erred when it determined that the agreement was lawful based in part on a provision that allowed the parties to abandon their deal if the FTC objected to it. The court incorrectly interpreted that provision of the settlement agreement as an “effective grant of veto power to the FTC.” These provisions, according to the Commission, have no relevance to the rule of reason inquiry because they do not shed any light on the likely competitive effects of the alleged restraint.

Companies: Aetna Health of California Inc.; SmithKline Beecham Corp.

News: Antitrust FederalTradeCommissionNews