3rd Circuit Expanded Antitrust Law: WLF
Washington Legal Foundation (WLF) says that a 3rd Circuit Court of Appeals decision in a patent reverse payment case involving Pfizer and Ranbxy “represents a major expansion of antitrust law” and directly conflicts with the Supreme Court’s Actavis decision. In a brief asking the high court to hear Pfizer’s appeal, WLF says it is “concerned that the decision will make it virtually impossible for parties to settle drug patent disputes and will have serious negative effects on incentives for drug companies to develop and market innovative, life-saving products.”
WLF asks the Supreme Court to resolve this question: whether an antitrust complaint alleging a “large” and “unjustified” reverse-payment patent settlement agreement states a plausible claim for relief of the sort recognized by FTC v. Actavis when (1) the complaint lacks factual allegations purporting to demonstrate that value transferred to the patentee as part of the settlement was materially less than value transferred to the alleged infringer; (2) the value allegedly transferred to the alleged infringer consists of an agreement to accept a reduced level of damages for pending infringement claims; and (3) the plaintiffs’ reverse-payment claims cannot be adjudicated without a trial on the merits of the settled patent infringement claims.
The case involves a 2008 settlement between Pfizer and Ranbaxy to resolve scores of pending patent disputes, including Pfizer’s claim that Ranbaxy infringed its Lipitor patents (by notifying FDA of its intent to market a generic version of Lipitor) and its patents on Accupril (by marketing a generic version from 12/2004 until a 3/2005 federal district court order preliminarily enjoining further marketing).
WLF says the principal terms of the complex settlement were that (1) both parties agreed to drop their competing claims for damages with respect to Accupril; (2) Ranbaxy agreed to pay $1 million to Pfizer in connection with the competing Accupril claims; (3) Ranbaxy agreed to drop its claims that the Lipitor patents were invalid and/or not infringed; and (4) Pfizer granted Ranbaxy a non-exclusive license to market a generic form of Lipitor in the U.S. beginning 11/2011, a date 3.5 years after the settlement agreement but more than five years before expiration of the last of Pfizer’s seven Lipitor patents. Pfizer transferred no cash or tangible assets to Ranbaxy, the filing says.
Rite-Aid and other direct purchasers of Lipitor who brought suit challenging the settlement argued that Pfizer’s “large” and “unjustified” payment to Ranbaxy in exchange for Ranbaxy delaying its marketing of generic Lipitor involved Pfizer’s agreement to settle the Accupril litigation for an amount far less than it could have recovered at a patent infringement trial.
A federal district court dismissed the antitrust complaints for failure to state a claim, saying that a patent settlement can constitute a reverse-payment patent settlement even when the “payment” does not consist of cash. But the 3rd Circuit reversed, holding that the complaint sufficiently alleged an actionable reverse-payment settlement agreement by alleging that Pfizer released its Accupril claim worth hundreds of millions of dollars. WLF says the appeals court focused solely on the allegedly large disparity between the amount accepted in settlement and the potential recovery.
“Review is warranted because the 3rd Circuit’s decision so clearly conflicts with this court’s Actavis decision,” WLF tells the Supreme Court. “Actavis directed courts to maintain a ‘balance’ between patent and antitrust laws, not (as the appeals court concluded) to subject to antitrust scrutiny any settlement agreement that provides any significant benefit to a generic company in return for its agreement to drop an invalidity claim.”