Reverse-Payment Settlements of ANDA Litigation: District Court Holds Money Payment Required for Antitrust Liability

A “reverse-payment” settlement of Abbreviated New Drug Application (“ANDA”) patent infringement litigation will not trigger potential antitrust liability under the Supreme Court’s FTC v. Actavis decision unless it contains a monetary payment to the generic, according to a recent district court decision. The court held that an agreement by the brand name drug company not to launch its own generic version (an “authorized generic”) during the generic drug company’s first-filer 180-day exclusivity period does not trigger potential antitrust liability, and granted the pharmaceutical company defendants’ motion to dismiss. In re Lamictal Direct Purchaser Litigation, 12-cv-995 (WHW) (D.N.J. January 24, 2014) (Senior Judge Walls), a copy of which is available here.

In Federal Trade Commission v. Actavis, Inc., No. 12-416,  _ U.S. _, 2013 WL 2922122 (June 17, 2013), the Supreme Court rejected both the “scope of the patent” and the opposing “quick look” tests for whether a “reverse-payment” settlement of ANDA infringement litigation violates the antitrust laws. Instead, the Court required a rule of reason analysis, at least in certain circumstances. Id. at *13. It has been unclear what circumstances would trigger that rule of reason analysis. One issue has been whether a monetary payment is required. The district court in Lamictal answered that question affirmatively, disagreeing with decisions by two other district court judges. In re Lamictal, slip op. at 19.

The case involves GlaxoSmithKline’s (“GSK’s”) Lamictal drug products for treating epilepsy and bipolar disorder. GSK sued Teva Pharmaceuticals (“Teva”) for infringement by filing an ANDA for generic versions of the drugs. The parties settled the case, with GSK allowing Teva to sell its products before the patent expiration, and agreeing not to launch a GSK generic version of the products during Teva’s 180-day exclusivity period. Id. at 1-3. Purchasers of the drug products sued GSK and Teva, alleging an antitrust violation based on GSK’s agreement not to launch a generic version as an illegal “reverse-payment” settlement. Id. at 3. On remand for reconsideration after the Supreme Court’s decision in Actavis, the district court affirmed its prior dismissal of the antitrust complaint for failure to state a claim for relief. Id. at 19. 

The court rejected the antitrust plaintiffs’ argument that Actavis requires a rule of reason analysis if “significant consideration, incentives, and benefits”—money or otherwise—flow from the brand name company to the generic. Id. at 5. First, the court concluded that “Actavis requires [antitrust] scrutiny only of patent settlements that contain reverse payments,” and that a settlement with only an early entry provision is “free from antitrust scrutiny.” Id. at 11-12. 

Second, it concluded that a suspect reverse-payment settlement requires at least an exchange of money: “Actavis applies to patent settlements that contain an unjustified reverse payment of money.” Id. at 19. The court reasoned that the Supreme Court majority and dissenting opinions focused on the “payment of money.” Id. at 13; see id. at 13-16.

The court disagreed with decisions by two other district judges, which stated that Actavis applies to non-monetary patent settlements, concluding that those decisions were “unsupported by the words of Actavis or are inapposite.” Id. at 16-17; disagreeing with In re Lipitor Antitrust Litig., M. Dkt. No. 3:12-cv-2389 (PGS), 2013 WL 4780496, at *26 (D.N.J. Sept 5, 2013) (Sheridan, J.) (“nothing in Actavis strictly requires that the payment be in the form of money”), and In re Nexium (Esomeprazole) Antitrust Litig., Civ. A. No. 12-md-02409 (WGY), 2013 WL 4832176, at *15 (D. Mass. Sept. 11, 2013) (“Nowhere in Actavis did the Supreme Court explicitly require some sort of monetary transaction to take place for an agreement between a brand and generic manufacturer to constitute a reverse payment.”).

In the event that an appellate court might find to the contrary, i.e., that Actavis did not limit a suspect “reverse-payment” settlement to one including the exchange of money, the court concluded that the GSK-Teva settlement satisfied the rule of reason. Id. at 18.

Accordingly, the court affirmed its prior grant of GSK’s and Teva’s motion to dismiss.

The effect and scope of Actavis will continue to be revealed as more lower courts interpret and implement that Supreme Court decision.