EDPA Judge Holds that Plaintiffs in Pay-for-delay Case Not Required to Establish Large and Unjustified Payment at Summary Judgment Stage | Practical Law

EDPA Judge Holds that Plaintiffs in Pay-for-delay Case Not Required to Establish Large and Unjustified Payment at Summary Judgment Stage | Practical Law

In FTC v. Cephalon Inc., Judge Mitchell Goldberg of the United States District Court for the Eastern District of Pennsylvania held that plaintiffs were not required at the summary judgment stage to establish that an alleged reverse payment was large and unjustified.

EDPA Judge Holds that Plaintiffs in Pay-for-delay Case Not Required to Establish Large and Unjustified Payment at Summary Judgment Stage

by Practical Law Antitrust
Published on 29 Jan 2015 • USA (National/Federal)
In FTC v. Cephalon Inc., Judge Mitchell Goldberg of the United States District Court for the Eastern District of Pennsylvania held that plaintiffs were not required at the summary judgment stage to establish that an alleged reverse payment was large and unjustified.
On January 28, 2015, Judge Mitchell Goldberg of the United States District Court for the Eastern District of Pennsylvania held in FTC v. Cephalon Inc. that plaintiffs challenging a reverse payment settlement between Cephalon and generic drug manufacturers were not required to establish that the reverse payment was large and unjustified at the summary judgment stage (No. 2:08-cv-2141 (E.D. Pa. Jan. 27, 2015)). In Cephalon, plaintiffs alleged that defendants violated antitrust law by entering four separate unreasonable reverse payment settlements (known as pay-for-delay agreements) regarding introduction of a generic forms of Cephalon's drug Provigil.
On a motion for summary judgment, defendants alleged that under FTC v. Actavis, plaintiffs were required, and failed, to meet a threshold burden establishing that the reverse payments were large and unjustified (133 S. Ct. 2223 (2013)). However, the court noted that Actavis never explicitly set a threshold burden. Instead, the court held that:
  • Actavis applied a standard burden-shifting rule of reason analysis to pay-for-delay agreements and plaintiffs were therefore only required to establish evidence of anticompetitive effects or defendants' market power to survive summary judgment.
  • The language in Actavis suggests that plaintiffs may meet the burden of establishing anticompetitive effects, or the first step of a rule of reason analysis, by establishing evidence of a large payment. Following a standard burden-shifting rule of reason analysis, defendants would then have the opportunity to explain why the large payment was justified and procompetitive.
The court further noted that Actavis listed an appropriate benchmark for a the size of a reverse payment to be the anticipated saved litigation costs.
The court held that plaintiffs presented sufficient evidence of the reverse payment exceeding saved litigation costs by comparing the average litigation costs for patent cases with more than $25 million at stake (approximately $5.5 million) with the alleged reverse payment. The court held that the comparison created a genuine dispute of material fact as to whether the payment was large enough to cause the generic manufacturers to delay market entry and therefore that the complaint should survive summary judgment.
The court noted that other district courts have touched on the issue of establishing a large and unjustified payment, but reasoned that none had advocated a threshold burden as argued by defendants. For more information on those cases, see Legal Updates, District of New Jersey Holds that Actavis Applies Only to Monetary Reverse Payment Settlements, Cash Only: Federal Judge Holds that Actavis is Limited to Monetary Settlement Payments and Jury Finds Nexium Pay-for-delay Agreement was Not Anticompetitive.
For more information on Actavis in general, see Actavis Case Tracker. For more information on reverse payment settlement agreements, see Practice Note, Reverse Payment Settlement Agreements.