On September 5, 2014, Judge Jan E. DuBois of the US District Court for the Eastern District of Pennsylvania held in In re Niaspan Antitrust Litigation, No. 13–MD–2460, (E.D. Penn. Sept. 5, 2014) that the US Supreme Court's ruling in FTC v. Actavis, Inc., 133 S.Ct. 2223 (2013) applies to reverse payment settlements, known as pay-for-delay agreements, that involve either cash or non-cash payments. In Niaspan, plaintiffs (direct purchasers and end payors for Niaspan, a type of B vitamin) alleged that Kos Pharmaceuticals Inc. entered into an unreasonable reverse payment settlement with Barr Pharmaceuticals Inc. The settlement resolved Kos's patent infringement suit against Barr in exchange for Barr's delaying the launch of generic Niaspan. The defendants filed a motion to dismiss this lawsuit, arguing that, because the settlement did not include a large and unjustifiable cash payment, it did not constitute a reverse payment settlement under Actavis. The court disagreed, holding that Actavis applies to reverse payment settlements that do not include cash.

Under the 2005 settlement, Kos and Barr entered into three separate but interrelated contracts:

The court rejected the defendants' motion to dismiss, holding that reverse payments are not limited to cash payments. The court noted that courts and the legal community in general have refused to define payments as only an exchange of cash. Further, the court held that the no-AG provision had the same effect as a cash payment in that it enticed the generic manufacturer to agree to a later entry date than it would otherwise have agreed to in order to settle the patent infringement case.

The court also noted that, even assuming that the no-AG clause itself is not a reverse payment, the plaintiffs had still plausibly alleged their claim. The plaintiffs alleged that the payments Kos agreed to make under the spurious co-promotion and manufacturing agreements were merely a way to disguise reverse payments. The plaintiffs specifically alleged that:

The court found that the plausibility of the plaintiffs' allegations was bolstered by the fact that those agreements were expressly contingent on Barr's promise to delay generic entry. As a result, the court held that the plaintiffs plausibly alleged the existence of a reverse payment for delayed entry with no legitimate procompetitive justification.

This decision is the fourth by a district court to address whether Actavis applies to reverse payment settlements that do not involve cash payments. At the time of this court's decision, two courts have ruled that Actavis requires cash payments and two have ruled that it does not. For more information on past court holdings see Legal Updates: