Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC seeks reconsideration of dismissal in AndroGel pay-for-delay suit, (Jul 22, 2015)

By Linda O’Brien, J.D., LL.M.

The dismissal of an FTC action charging several major pharmaceutical companies with illegally blocking consumers’ access to lower-cost generic versions of the topical testosterone replacement drug AndroGel should be vacated in light of the Third Circuit’s recent decision in in King Drug Co. of Florence, Inc. v. SmithKlineBeecham Corp., according to a motion for reconsideration filed in the federal district court in Philadelphia (FTC v. AbbVie Inc., July 20, 2015).

In September 2014, the FTC filed a complaint, charging several major pharmaceutical companies with settling their AndroGel patent litigation with an unlawful reverse payment agreement. AndroGel is a topical pharmaceutical gel product approved for testosterone replacement therapy in men with low testosterone. The FTC asserted that AbbVie Inc. and its partner Besins Healthcare Inc. filed baseless patent infringement lawsuits against potential generic competitors to delay the introduction of lower priced versions of AndroGel. While the lawsuits were pending, AbbVie then entered into an anticompetitive pay-for-delay settlement agreement with Teva Pharmaceuticals USA, Inc. to further delay generic drug competition, the FTC claimed.

In May 2015, the court dismissed the complaint, finding that the underlying patent infringement litigation between the patent holders and their generic competitor was not a sham and that settlement of the litigation was actually procompetitive and did not amount to an unwarranted reverse payment.

In King Drug, the U.S. Court of Appeals in Philadelphia considered a challenge to a settlement between Teva and GlaxoSmithKline (GSK) concerning two forms of the prescription drug Lamictal, in which GSK promised not to launch an authorized generic (AG) Lamictal tablet, the FTC asserted in a memorandum in support of its motion for consideration. In reversing the district court’s dismissal of the complaint, the Third Circuit focused on the economic substance of the transaction and concluded that no-AG agreements fall within the U.S. Supreme Court holding in FTC v. Actavis, Inc., 133 S.Ct. 2223 (2013) because they are likely to raise the same anticompetitive concerns as the cash payments to the generic manufacturers under separate co-promotion agreements.

In dismissing the FTC’s complaint, the court did not address what the Third Circuit deemed the key question under Actavis: whether AbbVie used the settlement agreement to induce Teva to abandon its patent challenge and thereby avoid the risk of competition. The court should undertake the inquiry mandated by King Drug and, under that approach, the FTC complaint amply states a claim under Actavis, the motion contends.

According to the FTC, the King Drug decision establishes that the presence of some consumer benefit in another market cannot immunize a reverse payment claim from antitrust scrutiny. The court did not address whether the FTC’s allegations were plausible that AbbVie used the transfer of “something of large value” in the settlement to induce Teva to abandon its patent claims and accept an entry date later than it otherwise would have.

A determination that an agreement between competitors was procompetitive was a factual issue. Unless there was no dispute that procompetitive effects predominated, the weighing of the procompetitive aspects of an allegedly anticompetitive agreement should be resolved in a rule of reason analysis and not as a matter of law on a motion to dismiss, the FTC motion concluded.

Attorneys: Patricia M. McDermott and Markus H. Meier for the Federal Trade Commission.

Companies: AbbVie Inc.

News: Antitrust PennsylvaniaNews