For more than two decades, our firm’s antitrust practice has represented some of the country’s largest retail drugstore chains in groundbreaking cases concerning the availability of competitively priced pharmaceutical products. These cases involve complex factual issues at the intersection of antitrust, intellectual property, and regulatory law. Our attorneys have decades of experience in federal trial and appellate courts. This short article describes our unique antitrust practice.
Generic versions of brand name drugs contain the same active ingredient as their brand-name counterparts. As part of the approval process, the FDA determines that generic drugs are just as safe and effective as their brand-name counterparts. The only material difference between brand-name and generic drugs is their price. The launch of a generic drug usually brings huge cost savings for all drug purchasers. The Federal Trade Commission has estimated that, by one year after market entry, the generic version takes over 90% of the brand’s unit sales and sells for 15% of the brand name product’s price. A generic typically achieves at least an 80% substitution rate within 90 days. As a result, brand-name companies view competition from generic drugs as a grave threat to their bottom lines.
Because of these high stakes, any delay of generic entry is very valuable to the brand-name manufacturer. On behalf of our retail pharmacy clients, we have vigorously opposed the various means by which brand-name drug manufacturers have delayed generic competition. One way that brand-name drug manufacturers have sought to delay generic competition is to settle patent litigation encouraged by the Hatch-Waxman Act by paying their generic competitors to delay the introduction of generic products.
The Hatch-Waxman Act was enacted by Congress in 1984. In enacting it, Congress sought both to expedite the entry of generic drugs, thereby reducing healthcare expenses, and to protect brand pharmaceutical manufacturers’ incentives to create new and innovative products. The Hatch-Waxman Act achieved both goals, substantially increasing the introduction of generic products and ushering in an era of significant new product introductions by brand manufacturers. In 1983, before the Hatch-Waxman Amendments, only 35% of the top-selling drugs with expired patents had generic alternatives; by 1998, nearly all did.
To encourage the introduction of low-cost generic versions of brand name products, the Hatch-Waxman Act required brand name manufacturers to identify all patents covering their brand name products and created a cause of action that permitted brand manufacturers to sue any generic manufacturer giving notice of an intent to launch before expiration of any identified patent on the ground that it was invalid, unenforceable, or not infringed. While this statutory scheme was intended to encourage the early resolution of patent claims, it also had the unintended consequence of creating incentives for the brand to enter into settlement agreements including payments to its potential generic competitors to delay generic launch.
These settlement agreements among horizontal competitors not to compete have become known as “pay-for-delay” or “reverse-payment” agreements because the brand plaintiff in the patent case, which faces no potential liability to the generic, which it accuses of violating its patents, pays the generic defendant. Such settlements are the reverse of how most cases settle with the defendant paying damages to the plaintiff. By sharing its monopoly profits with the generic via a reverse payment, a brand-name manufacturer is able to protect its monopoly during the period of delayed generic entry. Under such an agreement, the generic challenger typically earns more by sharing in the brand’s monopoly than it would by entering the market and competing with the brand manufacturer.
Initially, reverse-payment agreements took the form of a straight cash payment from the brand-name manufacturer to the generic competitor. However, as a result of legislative and judicial scrutiny, brand-name and generic manufacturers have entered into increasingly elaborate agreements to try to mask reverse payments. For example, FTC v. Actavis, 570 U.S. 136 (2013), the landmark Supreme Court case recognizing the potential illegality of reverse payments under the antitrust laws, involved reverse payments allegedly conveyed through co-promotion and manufacturing side-deals negotiated in connection with settlement of patent litigation over the brand drug AndroGel.
Our lawyers have played a particularly significant role in the development of the law applicable to reverse-payment patent settlements. Since 1999, we have represented a party or an amicus in almost every appellate decision concerning private antitrust challenges to reverse payments. Our lawyers authored the winning briefs in In re K-Dur Antitrust Litigation, 686 F.3d 197 (3d Cir. 2012), which created the circuit split on reverse payments resolved by the Supreme Court in Actavis, and we filed an amicus brief in Actavis. The Supreme Court’s adoption of the rule of reason to evaluate reverse payments is the approach that we urged in K-Dur and many of our other reverse-payment cases. We have also been trial counsel in most of the reverse-payment cases to go to trial after the Actavis decision, including In re Modafinil Antitrust Litigation (2017), In re Solodyn (Minocycline Hydrochloride) Antitrust Litigation (2018), and In re Opana ER Antitrust Litigation (2022).
In 2023, our antitrust team, led by Barry Refsin with the assistance of shareholder Eric Bloom, associates Alex Egerváry, Caitlin McHugh and Chelsea Nichols, and paralegal Julie Solt, has been busy. We prepared to try three reverse payment cases, one in the Eastern District of Virginia involving Zetia, a treatment for high cholesterol, a second in the Southern District of New York involving Exforge, a high blood pressure treatment, and a third in the Northern District of California involving Truvada and Atripla, two HIV treatments. Our team’s preparation and willingness to go to trial led to favorable settlements in each of these cases.
Finally, earlier this month, Barry Refsin argued an appeal in the Second Circuit addressing the standard for pleading reverse payments. In that case, involving the drug Bystolic, the district court dismissed a complaint alleging that the brand manufacturer paid off each of the first six generic competitors seeking to introduce a generic form of its blockbuster treatment for high blood pressure by entering into various valuable side deals like those in Actavis. Taking a position at odds with that of the First Circuit and Third Circuit, the district court required plaintiffs to allege in detail that the payments in the side deals were not justified by the products and services in the side deals. By requiring plaintiffs to preemptively rebut arguments that the defendants might be able to support after discovery, the district court’s opinion threatens the viability of the cause of action for reverse payments that the Supreme Court permitted in Actavis.
These are just a few examples of our firm’s recent work in this space. As these matters continue to develop, stay on the lookout for updates in both the firm’s quarterly newsletter, on our website, and on social media.
