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FTC Loses Motion to Reconsider Pay-for-delay Claim in EDPA
Practical Law Legal Update w-000-5520 (Approx. 4 pages)
FTC Loses Motion to Reconsider Pay-for-delay Claim in EDPA
by Practical Law Antitrust
| Published on 27 Aug 2015 • USA (National/Federal) |
The US District Court for the Eastern District of Pennsylvania declined to alter an order granting pharmaceutical defendants' motion to dismiss a Federal Trade Commission (FTC) claim that the defendants entered an anticompetitive reverse payment settlement agreement for the drug AndroGel. The FTC sought reconsideration of the order in light of the US Court of Appeals for the Third Circuit's decision in King Drug Co. of Florence, Inc. v. Smithkline Beecham Corp.
On August 25, 2015, the US District Court for the Eastern District of Pennsylvania in FTC v. Abbvie, Inc. denied the Federal Trade Commission's (FTC) motion to reconsider its claim that a group of pharmaceutical defendants entered a reverse payment settlement agreement (also known as a pay-for-delay agreement) related to the testosterone drug AndroGel in violation of Section 5 of the FTC Act (No. 14-5151 (E.D. Pa. Aug, 25, 2015)).
In Abbvie, the FTC challenged a settlement between pharmaceutical company AbbVie (and several affiliated companies), Besins Healthcare, Inc. and Teva Pharmaceuticals USA, Inc. regarding Teva's attempt to sell a generic version of AbbVie and Besins' brand name drug AndroGel. The agreement required:
- AbbVie to drop its patent infringement lawsuit against Teva regarding the AndroGel patent.
- Teva to drop its counterclaim against AbbVie alleging sham litigation.
- AbbVie to allow Teva to market its generic form of AndroGel nearly six years before the patent was set to expire.
- Abbott (AbbVie's affiliate) and Teva to enter a licensing agreement in which Abbott would supply Teva with an authorized generic version of a separate drug, TriCor, for four years, during which time no other authorized generic version of TriCor would be marketed (a no-authorized generic (no-AG) agreement). Under the licensing agreement, Teva would pay for Abbott's cost of producing TriCor, in addition to a percentage of the cost and a royalty on Teva's profits.
In May 2015, the court granted AbbVie's motion to dismiss the pay-for-delay claim based on the FTC's failure to allege any reverse payment between AbbVie and Teva, as the court determined a payment was required under Actavis. The court found that the TriCor licensing and no-AG agreement did not constitute a reverse payment.
The FTC's motion to reconsider came after the US Court of Appeals for the Third Circuit held in King Drug Co. of Florence, Inc. v. Smithkline Beecham Corp. that Actavis applied to a pay-for-delay deal involving a no-AG agreement because it:
- Transferred considerable value from GSK to Teva that could not be justified in terms of saved litigation costs, payment for services or otherwise.
- Had anticompetitive consequences potentially as harmful as if there were a cash reverse payment.
The FTC argued that under King Drug, the AbbVie no-AG and licensing agreements should also be considered anticompetitive reverse payments under Actavis.
In denying the motion to reconsider the FTC's claim, the court held that the AbbVie settlement materially differed from the King Drug settlement and did not fall under Actavis, principally because the AndroGel and TriCor agreements appeared to be independent of each other. The court reasoned that in AbbVie:
- The early-entry agreement and the no-AG agreement concerned two different drugs, rather than the same drug as in King Drug.
- Both the early-entry agreement and the no-AG agreement facilitated competition in the market for each drug.
- Unlike in King Drug, Abbott received consideration from Teva for the TriCor licensing agreement, separate from the AndroGel settlement.
Therefore, the court found that the facts that led the court to find a reverse payment in King Drug were not present in AbbVie.
For more information on lower court holdings post-Actavis, see Actavis Case Tracker. For more on reverse payment settlement agreements in general, see Practice Note, Reverse Payment Settlement Agreements.