FTC v. Actavis, Inc. Q&A: Implications for Pharmaceutical Companies

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On June 17, 2013, in FTC v. Actavis, Inc., the U.S. Supreme Court ruled that plaintiffs may bring antitrust suits against so-called “reverse payment” or “pay-for-delay” settlements, under which pioneer and generic pharmaceutical companies resolve patent disputes through arrangements that involve the transfer of cash or other consideration from the patent owner to the alleged infringer. The case, however, also left many unanswered questions for companies that are contemplating or have entered into settlements that could be viewed as falling within these categories. These companies may want to consider the following questions, among others...

Does the Court’s rejection of the FTC’s “presumptive illegality” test matter from a counseling perspective? -

The Court rejected the “scope-of-the-patent test,” under which the U.S. Courts of Appeals for the Second, Eleventh, and Federal Circuits had held that companies involved in such patent settlements were immune from antitrust liability if the settlements did not restrict competition to a greater degree than the patent would have if valid and infringed. The Court, however, also rejected the FTC’s “presumptive illegality” test. This rejection may matter a great deal for antitrust litigation because the opportunity to contest anticompetitive effect opens up a whole area of discovery, opposition to partial summary judgment, and trial, but it may not matter for counseling purposes. The Court says that an antitrust plaintiff cannot simply leap over the question of anticompetitive effect and go immediately to the defendants’ pro-competitive justifications, but the Court also says that lower courts are free to use a “sliding scale” to determine whether there is enough of an inference of anticompetitive effect to warrant exploring the defendants’ justifications. As a counselor, one has no idea in what forum an antitrust case might end up or what standards the judge will require the plaintiff to satisfy in order to meet its initial burden. Accordingly, a prudent counselor would immediately start by questioning the business people about why they felt it was necessary to venture into territory that carries antitrust risk. In other words, a counselor would go directly to the question of justification, just as he or she would have if the Court had accepted the FTC’s “presumptive illegality” test.

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