FTC’s Amicus Brief in Wellbutrin XL Appeal Highlights Significance for Interpretation of Actavis

by BakerHostetler
Contact

The FTC has recently weighed in again on the evolving interpretation of the Supreme Court’s 2013 opinion in FTC v. Actavis, 133 S. Ct. 2223 (2013). The agency submitted an amicus brief to the Third Circuit in the appeal of the district court’s September 2015 grant of summary judgment in In re Wellbutrin XL Antitrust Litigation, — F. Supp. 3d —- (E.D. Pa. Sept. 23, 2015) (“Wellbutrin XL”).

In Wellbutrin XL, direct and indirect purchaser plaintiffs brought antitrust claims against GlaxoSmithKline (“GSK”), the manufacturer of the antidepressant drug Wellbutrin XL, and Biovail, which owns rights to related patents (collectively, “Biovail”), in connection with Biovail’s alleged “reverse payment” settlement of patent litigation with generic competitors that allegedly delayed the market entry of a generic version of the drug.

In its simplest form, a “reverse payment” settlement involves a payment from a brand-name drugmaker plaintiff to a generic competitor defendant to settle Hatch-Waxman Act patent infringement litigation in exchange for an agreement by that defendant not to launch a competing generic version of the drug until some time in the future. In its 2013 Actavis opinion, the Supreme Court held that such a “reverse payment” – if “large” and “unexplained” – may raise antitrust issues because it suggests that the brand-name company has doubts about the viability of its patents and is therefore paying the generic competitor to drop its challenge to those patents. Under the Hatch-Waxman scheme, this can prevent generic entry into the market altogether and preserve the branded company’s monopoly profits.

The agreement at issue in Wellbutrin XL differed from this prototypical reverse payment scenario because it did not, as a technical matter, settle the underlying patent litigation. Rather, in Wellbutrin XL, the generic defendant in the underlying patent action, Anchen, had already prevailed in the district court, had been involved in the “at risk” launch of 300-mg generic Wellbutrin XL while the matter was on appeal (i.e., at risk of a sizable damages judgment because the patent infringement action was not final), and planned to launch a 150 mg generic version of the drug in early 2007. The parties then agreed that Anchen would hold off on launching the generic 150 mg version for over a year unless the appeal was resolved in its favor before that time. The agreement also included a “no-AG” (i.e., no authorized generic) agreement under which GSK would not launch its own competing “authorized generic” during the 180-day “first-filer exclusivity” period granted to Anchen under the Hatch-Waxman scheme.

On summary judgment, the district court in Wellbutrin XL dismissed the antitrust claims, finding that no reasonable jury could find the challenged agreement to be unlawful, and the plaintiffs appealed that ruling to the Third Circuit. In its brief, while officially taking no position on the merits of the case, the FTC points out what it characterizes as “fundamental legal errors” in the district court’s analysis. Perhaps most importantly, the FTC contends that the district court applied an “untenably narrow” reading of Actavis, finding that it applied only when a reverse payment causes a generic challenger to abandon its patent challenge altogether. According to the FTC, Actavis teaches that a reverse payment may be anticompetitive and raise antitrust concerns whenever it induces the generic company to stay out of the branded drug’s monopoly market, regardless of whether the underlying patent litigation continues. In Wellbutrin XL, the FTC claims, the generic competitor could have launched “at risk” following its district court victory, but agreed to delay market entry in exchange for a no-AG agreement from Biovail valued at $200 million. In finding Actavis inapplicable simply because the underlying litigation was not ended, the district court improperly “elevated nominal factual distinctions over economic reality.”

A closer look at the case reveals a more nuanced picture, however. The district court observed that the settlement at issue did not present the same antitrust concerns as those motivating the Actavis decision. However, the court recognized that an overly formalistic reading of Actavis risked creating an “easily exploited loophole,” and proceeded to analyze the settlement under the rule-of-reason, as Actavis instructs. The court stated, however, that the parties’ preservation of the underlying patent litigation is a “factor to be considered” in the analysis, suggesting that the court applied a modified version of the rule-of-reason test. It is not clear that this approach is inappropriate, though, since the rule-of-reason test is notoriously fact-specific, and the Actavis opinion expressly recognized that the proof required would vary with the circumstances.

Wellbutrin XL involves a complex settlement agreement with many interconnected components, reached in an equally complicated factual context. For example, Anchen faced regulatory obstacles to launching, an uncertain prospect of prevailing on appeal, plus potential liability for “at risk” launch in a separate patent infringement action brought by a third party – the defense of which was complicated by potential estoppel issues because Anchen’s CEO was the inventor on the patent-in-suit. The settlement with Biovail included patent licenses that removed an important obstacle to the generic launch. The FTC’s brief glosses over much of this complexity. In the FTC’s view, however, there is a potential antitrust violation (though perhaps not private-party standing) when there is an unexplained reverse payment – here in the form of a no-AG agreement – and delayed entry, suggesting the sharing of monopoly profits in exchange for an agreement to preserve that monopoly, at least for a time. Any procompetitive benefits must be linked to the reverse payment to be considered.

The FTC’s brief raises critical questions regarding the meaning of Actavis and its application to Hatch-Waxman settlement agreements that depart from the “classic” reverse-payment structure. The Third Circuit’s resolution of these issues in the Wellbutrin XL appeal may be a significant step in further defining the contours of Actavis and helping parties to craft settlement agreements that actually achieve settlement, rather than more litigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© BakerHostetler | Attorney Advertising

Written by:

BakerHostetler
Contact
more
less

BakerHostetler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.