FTC Files Amicus Brief to Expand the Holding of Supreme Court's Actavis Decision to Non-cash Reverse Payment Settlements | Practical Law

FTC Files Amicus Brief to Expand the Holding of Supreme Court's Actavis Decision to Non-cash Reverse Payment Settlements | Practical Law

The FTC requested that the US District Court for the District of New Jersey accept its amicus brief in support of applying the US Supreme Court's decision in FTC v. Actavis to In re Effexor XR Antitrust Litigation.

FTC Files Amicus Brief to Expand the Holding of Supreme Court's Actavis Decision to Non-cash Reverse Payment Settlements

by Practical Law Antitrust
Published on 20 Aug 2013 • USA (National/Federal)
The FTC requested that the US District Court for the District of New Jersey accept its amicus brief in support of applying the US Supreme Court's decision in FTC v. Actavis to In re Effexor XR Antitrust Litigation.
On August 14, 2013, the FTC requested that the US District Court for the District of New Jersey accept its amicus brief in support of applying the US Supreme Court's decision in FTC v. Actavis to In re Effexor XR Antitrust Litigation.

Background

In Effexor, the plaintiffs challenged a patent settlement between drug manufacturers Wyeth and Teva Pharmaceuticals (together, defendants) in which the defendants agreed not to compete with each other in the antidepressant market by:
  • Teva abandoning its patent challenge against Wyeth and delaying introduction of its generic antidepressant, allowing Wyeth's brand-name drug to control the market.
  • Wyeth delaying introduction of its own authorized generic, allowing Teva's generic to control the market once generic entry was permitted (referred to as the no-authorized-generic commitment).
The plaintiffs alleged that during the two periods, Wyeth and Teva, respectively, enjoyed monopoly profits and harmed consumers.

Actavis Decision

The Supreme Court addressed reverse-payment patent settlements in Actavis. In Actavis, the Court held that when a brand-name drug manufacturer pays a generic manufacturer to delay competition in exchange for settling patent litigation (known as reverse-payment settlements), the settlement agreement is subject to a traditional antitrust analysis under the rule of reason.
In its amicus brief, the FTC argued that under Actavis, reverse-payment patent settlements may trigger antitrust concerns if:
  • The payment is not something the generic manufacturer could have won in patent litigation.
  • The parties share monopoly profits derived from avoiding competition.
For more information on the Actavis decision, see Legal Update, Supreme Court Issues Decision in Pay-for-Delay Case FTC v. Actavis.

Application to In re Effexor

The defendants in Effexor argued that because their agreement did not include any form of cash payment in exchange for delayed entry, but instead involved non-compete agreements, the Actavis decision is not applicable.
The FTC cautioned that if non-cash settlements are immune from antitrust liability like the defendants argue, drug manufacturers could easily skirt the Actavis ruling to avoid antitrust scrutiny in patent settlements and ultimately harm consumers.

Practical Considerations

The Actavis decision was a recent win for the FTC in a long-fought battle on reverse-payment settlements. By filing the amicus brief in Effexor, the FTC shows that it will:
  • Attempt to expand the Supreme Court's ruling in Actavis outside the facts of that case.
  • Continue to enforce potentially anticompetitive patent settlements to keep out generic entry no matter how they are structured.

Court Documents