Brief Amici Curiae of the American Antitrust Institute and Consumers Union
ED Pa Brief in In re: Wellbutrin XL Antitrust Litigation
34 Pages Posted: 2 Oct 2013
Date Written: October 2, 2013
In FTC v. Actavis, the Supreme Court held that a payment from a brand firm to a generic firm, in exchange for the generic’s agreement to delay entering the market, could violate the antitrust laws. In In re Wellbutrin XL Antitrust Litigation, defendants claim that the Court’s antitrust analysis applies only if the brand pays the generic in cash. This amicus curiae brief, submitted in the Eastern District of Pennsylvania on behalf of the American Antitrust Institute and Consumers Union, reveals five problems with this formalistic argument.
First, the brand’s agreement not to launch an "authorized generic" during the first-filing generic’s 180 days of exclusivity can transfer tens or hundreds of millions of dollars to the generic. Brands are increasingly making these types of payments in exchange for generics’ reciprocal agreements to drop patent challenges and delay entering the market.
Second, both Actavis’ language and fundamental antitrust law prevent defendants from distinguishing Actavis based on the form of payment that the brand makes in exchange for the generic’s delayed entry. A payment by means of a no-authorized-generic agreement, no less than by means of an above-market-value business deal (by which the brand overpays for unrelated services provided by the generic), can have significant anticompetitive effects.
Third, in the Wellbutrin XL case, the brand firm and the generic with the 180-day exclusivity period allocated the market between themselves by exchanging non-competition pledges. The generic agreed to delay entry, and in exchange, the brand agreed not to launch an authorized generic during the 180-day exclusivity period. In all material respects, this transaction has the same economic structure and effect as the agreement in Actavis.
Fourth, Actavis held that the payment there – an above-market-value business deal – was suspect because it transferred value to the generic that it could not have obtained even if it had won the patent case. Similarly, in this case, the generic could not have blocked the brand from entering with an authorized generic even if the generic had won the patent case. In both Actavis and Wellbutrin XL, the brand firm bought an additional delay in generic entry, beyond any delay legitimately reflecting a compromise on disputed patent rights, by granting to the generic valuable consideration that even a patent win could not have delivered.
Fifth, the brand cannot avoid antitrust scrutiny by invoking the label "exclusive license." The brand in this case did not merely grant to the generic the right to enter free from competition from an authorized generic; it granted that right in exchange for the generic’s reciprocal agreement to drop the patent challenge and delay entry. Thus, a proper antitrust analysis must consider the "exclusive license" not in abstract isolation, but in its real economic context as one part of the two drug firms’ reciprocal agreements not to compete.
In short, if drug companies can evade the logic of Actavis by artfully structuring settlements that are indistinguishable in economic substance from cash payments for delay, the Supreme Court's ruling will be reduced to a dead letter.
Keywords: patent, antitrust, settlement, authorized generics, drugs, pharmaceuticals, Hatch Waxman, reverse payment, exclusive license
JEL Classification: I18, K21, L40, L41, L43, L65, O34, O38
Suggested Citation: Suggested Citation