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Reverse ANDA Settlements in the Wake of
FTC v. Actavis
October 8, 2014
12:30 pm – 2:00 pm Eastern
11:30 am – 1:00 pm Central
10:30 am – 12:00 pm Mountain
9:30 am – 11:00 am Pacific

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Online Programs Committee
Webinar Coordinators
Tim Howe
Sanofi Pasteur
Paul Ragusa
Baker Botts, LLP
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AIPLA Online Programs Committee Leadership
Stephen E. Belisle
Chair, Online Programs
Fitzpatrick Cella Harper & Scinto
Sbelisle@fchs.com
Jennifer M. K. Rogers
Webinar Coordinator
Vice Chair, Online Programs
Shumaker & Sieffert, PA
Rogers@ssiplaw.com

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Patty McDermott
United States Federal
Trade Commission
Jennifer Tempesta
Paul Simboli
(Moderator)
Depomed, Inc.
Baker Botts LLP

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Reverse ANDA Settlements in the Wake of
FTC v. Actavis
Jennifer Tempesta
Special Counsel
Baker Botts LLP
October 8, 2014

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

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Introduction
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
Hatch-Waxman Act
FTC v. Actavis, 133 S.Ct. 2223 (2013)
Case law since Actavis
Pending legislation

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 Attempts to balance public interest
 Abbreviated New Drug Application (“ANDA”)
 Paragraph IV certification
 Often lead to litigation

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 Payment from brand manufacturer to generic in exchange for agreement by generic to delay its entry into the market

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 Circuit split regarding reverse-payment settlements and antitrust laws
 Acceptable effect of settlement is within scope of patent
 Presumptively unlawful

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 Question: can reverse payment settlement constitute a violation of antitrust laws?
 Answer:
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
Yes, but each case considered individually
Rule-of-reason standard
 Lower courts to structure rule-of-reason

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 Cited many times already
 Several instances where courts considered motions related to what constitutes a reverse payment
 Disagreement
 At least 4 district court decisions have found that Actavis does not require a monetary payment in order to find a "reverse payment"
 At least 2 district courts have taken the contrary view, requiring a monetary payment in order for cases to survive a motion to dismiss

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 Plaintiffs alleged reverse-payment settlement
 Brand to forgive outstanding money judgments
 Generic to gain rights to market generic product in certain international markets

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 Plaintiff allowed to amend complaint
 Defendant argued no money; no violation
 Court rejected defendant’s argument
 Noted Actavis does not require monetary payments

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 Plaintiffs alleged reverse-payment settlement
 Brand to provide monetary payments or liability forgiveness
 Generic to delay entry

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 Pleadings enough to avoid dismissal
 Three-part rule-of-reason
 Exercise of power in a relevant economic market
 Anti-competitive consequences
 Detriments outweighed efficiencies

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 Noted Actavis does not require monetary transaction
 Court granted several motions to dismiss
 Plaintiff failed to demonstrate “large unjustified reverse payments” required by Actavis
 Detailed opinion is forthcoming

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In re Lamictal Direct Purchaser Antitrust Litigation
 Plaintiff alleged reverse-payment settlement
 Brand agreed not to launch an authorized generic during generic’s first-filer exclusivity period

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In re Lamictal Direct Purchaser Antitrust Litigation
 Three-part test from Actavis
 Reverse payment
 Reverse payment is large and unjustified
 Rule-of-reason

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In re Lamictal Direct Purchaser Antitrust Litigation
 Five-part rule-of-reason test
 Adverse effect
 Payment is justified
 Market power
 Size of settlement
 Possible to settle without reverse payment

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In re Lamictal Direct Purchaser Antitrust Litigation
 Court found that Actavis requires money
 No money; no reverse payment
 Motion to dismiss granted

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In re Loestrin 24 Antitrust Litigation
 "Because in this Court's view, Actavis requires cash consideration in order to trigger rule of reason scrutiny, and because the Plaintiffs have not adequately alleged payment in the form of cash . . . the Plaintiffs have failed to state a claim upon which relief may be granted under the current state of the law."
In re Loestrin 24 Fe Antitrust Litig., MDL 13-2472-S-PAS, 2014
WL 4368924 (D.R.I. Sept. 4, 2014)

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Time Ins. Co. v. AstraZeneca (Nexium)
 "There is currently a rift within the federal judiciary over whether Actavis applies to reverse payment agreements under which the compensation provided by the patent-holder takes
a form other than direct cash settlements. . . . Having carefully considered the competing analyses . . . . In my opinion, reverse payments deemed anti-competitive pursuant to Actavis may take forms other than cash
payments."

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In re Effexor Antitrust Litigation
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The court looked to recent decisions and tried to strike a balance, holding that a "non-monetary payment must be converted to a reliable estimate of its monetary value so that it may be analyzed under the Actavis factors." slip op. at 35.
Found alleged reverse payment involving non-monetary payment must be valued in terms of a monetary amount in order to determine whether it is "large" within the meaning of Actavis. Id. at 37.
Granted motion to dismiss because plaintiffs did not provide evidence for court to determine value of payment.

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 S. 214, 113 Cong. (2013) – “A bill to prohibit brand name drug companies from compensating generic drug companies to delay the entry of generic drug into the market”

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 S. 504, 113 Cong. (2013) – “The Fair and Immediate Release of Generic Drugs Act”

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Patricia M. McDermott
Attorney, U.S. Federal Trade Commission
Bureau of Competition, Health Care Division
October 8, 2014
This presentation was prepared from public sources.
The views expressed herein do not necessarily reflect those of the Federal Trade Commission.

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Basic Reverse Payment Settlement
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Generic files ANDA with P(IV) certification
Brand sues generic for infringement
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Brand and generic settle
Generic agrees to refrain from entering market until a certain date
Brand provides some form of compensation to the generic that the generic could not have obtained even if it had prevailed in litigation

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Why Do Reverse Payments Raise Antitrust Concerns?
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Generic refrains from entering in exchange for share of brand’s monopoly profits
Agreement between two competitors not to compete – Sherman Act § 1
Maintenance of monopoly through improper means – Sherman Act § 2
Brand and generic can make more by not competing – at the expense of consumers

Pre-Generic Entry
Generic Competition
Generic’s profits
Brand’s profits
Consumer savings
Brand’s monopoly profits
Pay for Delay
Generic’s cut of monopoly profits
Brand’s profits
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The Supreme Court’s Actavis Decision
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Involvement of patent does not preclude antitrust scrutiny
Supreme Court rejects the “scope-of-the-patent” test
“[T]his Court’s precedents make clear that patent-related settlement agreements can sometimes violate the antitrust laws.”
True regardless of whether the patent is valid or infringed
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
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 The scope-of-the patent test is contrary to:
The “general procompetitive thrust of the” Hatch-Waxman Act
Hatch-Waxman’s “specific provisions facilitating challenges to a patent’s validity” and
Hatch-Waxman’s more recent provisions requiring parties to a P(IV) settlement to report the settlement terms to the F TC

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Supreme Court’s Guidance For Rule Of Reason Review
 The focus of the antitrust inquiry is on the payment,
not the patent
 Size (and relationship) matters
 Key question: Did the payment induce the generic to stay out of the market?
 Elimination of the risk of competition constitutes the relevant anticompetitive harm

Issues Likely To Be Contested PostActavis
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4.
5.
6.
7.
1.
2.
3.
What is a “payment”?
What is a “large” payment?
Who has the burden of proof to show an
“unexplained” or “unjustified” payment & what proof is required?
What can be counted as “saved litigation costs”?
What “other justifications” are permitted?
What about market or monopoly power?
What is the role of the patent?

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What’s At Stake For Consumers?
If reverse payments are permitted, consumers and payers lose the benefits of generic entry prior to patent expiration arising from:
1.
Generic victories in patent litigation
2.
Settlements without reverse payments
3.
“At risk” entry by generics

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Impact Of Reverse Payment Settlements
2010 FTC Staff Study:
 Agreements with compensation to generic companies restrict entry an average of 17 months longer than agreements without
 Reverse payment settlements cost U.S. consumers $3.5 billion per year

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Parties Can Settle Without Reverse Payments
Overview of Final Settlements (2004-2012)
Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012
Final Settlements 14 11 28 33 66 68 113 156 140
Potential Reverse Payment 0 3 14 14 16 19 31 28 40
0% 27% 50% 42% 24% 28% 27% 18% 28%
Potential Reverse Payment
Involving First Filers
0 2 9 11 13 15 26 18 23

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Ending Pay-For-Delay Is A Top FTC Priority
Prepared Statement of the Fed. Trade Comm’n
Before the U.S. Senate Comm. On the Judiciary (July 23, 2013) at 1

The FTC’s Current Reverse Payment Cases
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FTC v. Cephalon (Provigil)
Summary judgment fully briefed and pending in E.D. Pa.
Court held collateral estoppel precludes Cephalon from relitigating patent validity
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FTC v. Actavis (AndroGel)
On remand to N.D. Ga. from Supreme Court
Renewed motion to dismiss based on Noerr-Pennington recently denied
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FTC v. AbbVie (AndroGel)
Newest case filed by FTC on Sept. 8, 2014 in E.D. Pa.
Alleges both sham litigation and illegal reverse payment

What’s Next For The FTC?
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 Pursue pay-for-delay matters currently in litigation
 FTC v. AbbVie (E.D. Pa.); FTC v. Actavis (N.D. Ga.); FTC v. Cephalon (E.D. Pa.)
• Monitor private litigations and file amicus briefs as appropriate
 Effexor XR (D. N.J.), Wellbutrin (E.D. Pa.) & Lamictal (3d Cir.)
• Investigate new pay-for-delay matters
• Re-examine settlements filed under the Medicare
Modernization Act (MMA) of 2003

19 Cases To Watch
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• The cases (by brand product name)
Actos, Adderall, Aggrenox, AndroGel, AndroGel Sham , Cipro, Effexor, K-Dur,
Lamictal, Lidoderm, Lipitor , Loestrin , Nexium , Niaspan, Opana,
Provigil , Skelaxin, Solodyn, Wellbutrin
• The brand companies
Abbott, AbbVie, AstraZeneca, Bayer, Besins, Biovail, Boehringer, Cephalon, Endo,
GlaxoSmithKline, King, Medicis, Pfizer, Shire, Schering, Takeda, Warner
Chilcott, Wyeth
• The generic companies
Actavis, Barr, Duramed, Dr. Reddy’s, HMR, Impax, Lupin, Mutual, Mylan, Par,
Perrigo, Ranbaxy, Rugby, Sandoz, Teva, Upsher Smith

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