One of the Federal Trade Commission’s (FTC) top priorities in recent years has been to litigate a costly legal tactic that more and more branded drug manufacturers have been using to stifle competition from lower-cost generic medicines. This area of litigation, often referred to as Pay-for-Delay litigation, has not only been a hot topic with the FTC, but it has been an emerging litigation across the country.
One of the cases filed by the FTC is FTC v. Cephalon pending in the Eastern District of Pennsylvania regarding the drug Provigil. The Court in that case just recently issued a very favorable ruling for the FTC, which is also very promising to future Plaintiffs.
On Jan. 28, 2015, U.S. District Judge Mitchell S. Goldberg ruled that there is no threshold burden for Plaintiffs to prove that the brand manufacturer made a “large and unjustified” payment to the generic manufacturer. Instead, the Court ruled that this determination will be included as a factor in the rule of reason analysis, as opposed to a threshold burden. The Court further ruled that the FTC and numerous private Plaintiffs presented sufficient evidence that these series of reverse payment agreements between Cephalon, Inc. and its generic rivals were anticompetitive and, thus, allowed the claims to go forward.
This antitrust litigation arose from agreements termed “pay-for-delay” or “reverse payment” agreements whereby brand manufacturer Cephalon reached an agreement with generic competitors to resolve patent infringement litigation over the drug Provigil after certain generic competitors sought approval with the FDA to enter the market. As part of the deal, Cephalon allegedly paid the generic competitors more than $200 million in exchange for agreements that they would not sell their generic products until April 2012. These reverse payment agreements have been attacked across the country by several Plaintiffs, including the FTC, on the grounds that they violate antitrust laws.
In FTC v. Cephalon, U.S. District Judge Mitchell S. Goldberg rejected Cephalon’s argument that the Supreme Court’s 2013 decision in FTC v. Actavis requires a Plaintiff challenging a reverse payment agreement on antitrust grounds to prove, as a threshold matter, that the reverse payment was both large and unjustified. Rather, the Court ruled that it comes down to the typical rule-of-reason test used in antitrust cases. Judge Goldberg’s order says:
After careful consideration of the Actavis case and several recent district court opinions interpreting the standards set forth by the Supreme Court, I conclude that Actavis primarily instructs that the familiar antitrust rule-of-reason analysis be applied to cases challenging reverse-payment settlements. This analysis does not include a threshold burden.
The Court stated that the FTC and numerous other Plaintiffs who filed their own private actions that were consolidated with the FTC suit satisfied their rule-of-reason burden of presenting evidence of anticompetitive effects, which includes a large reverse payment. Because Judge Goldberg is looking at the case through a rule-of-reason analysis, he ruled that the burden then shifts to Cephalon and the several generic-drug makers with which it’s accused of entering into a reverse settlement, to justify the reverse payment as “procompetitive.”
This is just another example of how this Pay-for-Delay litigation has been progressing favorably across the country. This ruling provides for a positive outlook for Plaintiffs in future Pay-for-Delay cases. If you would like to know more about this Pay-for-Delay litigation, contact Ali Hawthorne, a lawyer in our firm’s Consumer Fraud Section, at 800-898-2034 or by email at Alison.Hawthorne@BeasleyAllen.com.
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