In September 2014, two separate district courts dismissed claims against branded drug manufacturers stemming from pay-for-delay patent infringement settlements. While the end result was the same, the opinions from these cases show a continuing inconsistency in the approach courts are taking as to whether reverse payment claims should be interpreted flexibly under the Supreme Court's 2013 decision in FTC v. Actavis to include non-cash payments, or more strictly to require an actual cash payment.
On Sept. 12, Judge Peter G. Sheridan in New Jersey dismissed a multidistrict case challenging an allegedly anticompetitive settlement between Pfizer Inc. and Ranbaxy Laboratories Ltd. concerning patents for the cholesterol drug Lipitor. See In re Lipitor Antitrust Litig., No. 3:12-cv-02389 (PGS), 2014 U.S. District LEXIS 127877 (D.N.J. Sept. 12, 2014). Judge Sheridan did not take issue with the fact that the allegedly anticompetitive settlement was nonmonetary, but nevertheless dismissed the case because the plaintiffs failed to quantify and reasonably estimate the value and amount of that nonmonetary payment. By contrast, on Sept. 4, Judge William E. Smith in Rhode Island similarly dismissed a claim that Warner Chilcott PLC and others entered into an illicit agreement regarding Loestrin, but did so on the basis that Actavis requires an actual cash payment to violate the antitrust laws. See In re Loestrin 24 Fe Antitrust Litig., No. 1:13-md-2472-S-PAS, 2014 WL 4368924 (D.R.I. Sept. 4, 2014). In particular, because the settlement agreement at issue included a worldwide license to one generic firm and other co-promotion and licensing arrangements—but did not call for any cash exchange—it did not trigger Actavis.
District courts are struggling to determine whether Actavis endorses antitrust challenges to non-cash reverse payment settlement agreements. Indeed, Judge Smith specifically recognized that he had been "left with an irreconcilable quandary," and suggested that a strict application of Actavis likely allows pharmaceutical companies "to evade Sherman Act scrutiny" by simply "tak[ing] the obvious cue to structure their settlements in ways that avoid cash payments." As district courts continue to disagree on the proper application of Actavis, the appellate courts will inevitably be called upon settle the issue.
The two opinions are available here and here.
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