IP Law Daily, PATENT—2d Cir.: Dismissal of reverse payment allegations in ‘beta blocker’ litigation upheld, (May 13, 2024)

By Jeffrey May, J.D.

FTC had argued for reversal but failed to sway the Second Circuit.

Wholesalers, retail-company purchasers, and end payors of brand and generic Bystolic, a “beta blocker” designed to treat high blood pressure, failed to plausibly allege that drug companies entered into unlawful reverse payment deals in order to keep generic Bystolic out of the market, the U.S. Court of Appeals in New York City ruled. In so holding, the court pointed out that “[r]everse payments may look dubious, but they are not automatically unlawful.” The appellate court also refused to overturn dismissal on the ground that the district court misapplied the pleading law set forth in Bell Atlantic Corp. v. Twombly, Ashcroft v. Iqbal, and related Second Circuit’s precedent (In re: Bystolic Antitrust Litigation , No. 23-410 (2d Cir. May 13, 2024)).

Forest Laboratories, the brand manufacturer of Bystolic, was accused of paying generic drug companies for products or services it did not truly need in order to shield Bystolic from competing with its generic equivalents, thereby enabling Forest to share monopoly profits with its potential rivals. The purported result for purchasers and payors was payment of supra-competitive prices. However, none of the six identified transactions “reflected anything other than ‘fair value’ for goods and services obtained as a result of good-faith business dealings.” The appellate court pointed out that this determination was one of the “traditional settlement considerations” squarely privileged under the U.S. Supreme Court's decision in FTC v. Actavis, Inc., which held that reverse-payment settlements—where a patent-holding plaintiff pays the allegedly patent-infringing defendants—may violate the antitrust laws under certain circumstances but are not per se or presumptively illegal. The appeals court noted that the case was the first time that the Second Circuit had considered an Actavis claim.

Six commercial transactions. The appeals court considered separately each of the six challenged commercial transactions that Forest contemporaneously entered into with the settlement agreements arising out of Hatch-Waxman patent-infringement lawsuits, known as the “Nebivolol Patent Litigation.” Under the settlements, the generic companies agreed to forgo the launch of their products for several years. The alleged “side deals” between Forest and the generic companies, including term sheets, a collaboration agreement, and a patent-assignment agreement, were not outside the parameters allowed in Actavis, in the court’s view. They were not adequately alleged to be a pretext for anticompetitive conduct.

Among the overarching reasons supporting dismissal were that the terms of the commercial transactions reflected bona fide business considerations. Moreover, the agreements’ provisions trumped allegations of unsupported speculation about nefarious motives, according to the court.

FTC views. The FTC had filed a friend-of-the-court brief, supporting the plaintiffs. The court noted the FTC’s position was that the plaintiffs “pleaded an Actavis claim by alleging ‘peculiar circumstances’ showing that the Commercial Transactions are not explainable as ordinary, arms-length business arrangements unrelated to the Generic Defendants’ agreements to not enter the Bystolic market until near the expiration of Forest’s [relevant] Patent.” The FTC argued that the plaintiffs were entitled to engage in discovery. The appellate court was not swayed.

The Case is No. 23-410.

Judge: Nardini, W.

Attorneys: Eric L. Bloom (Hangley Aronchick Segal Pudlin & Schiller) for CVS Pharmacy, Inc., Rite Aid Corp. and Rite Aid Hdqtrs. Corp. Eric Grannon (White & Case LLP) for Forest Laboratories Inc., Forest Laboratories Ireland, Ltd., Forest Laboratories Holdings Ltd., Forest Laboratories, LLC, Allergan Sales LLC and Allergan, Inc.

Companies: CVS Pharmacy, Inc.; Rite Aid Corp.; Rite Aid Hdqtrs. Corp.; Forest Laboratories Inc.; Forest Laboratories Ireland, Ltd.; Forest Laboratories Holdings Ltd.; Forest Laboratories, LLC, Allergan Sales LLC; Allergan, Inc.

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