Brief Amici Curiae on Behalf of 70 Law, Economics, and Business Professors and the American Antitrust Institute in Support of Appellants
First Circuit brief in In re: Loestrin 24 FE Antitrust Litigation, 2015
45 Pages Posted: 17 Jun 2015
Date Written: June 16, 2015
In FTC v. Actavis, the Supreme Court held that a brand payment to a generic to delay entering the market could have "significant anticompetitive effects" and violate the antitrust laws. In a narrow, formalistic ruling, the court in In re Loestrin held that such payments were limited to cash. On behalf of 70 professors and the American Antitrust Institute, this First Circuit amicus brief urges reversal.
First, the brief argues that “payment” under Actavis is not limited to cash. It notes that the Actavis case itself did not involve the payment of straight cash, that antitrust scrutiny focuses on substance rather than form, and that it makes no sense to affirm the lower court’s “vexing” conclusion that limits antitrust scrutiny to cash payments.
Second, the brief contends that the lower court applied an inappropriate antitrust framework, using five considerations that Actavis had employed to show that the policy in favor of settlement should not immunize exclusion-payment agreements. In contrast, the lower court used the “factors” to block plaintiffs from proving their cases, imposing the hurdle of calculating a “true value,” and finding that in the absence of such proof, plaintiffs would not be able to show anticompetitive effects, unjustified payments, market power, patent weakness, or the “basic reason” for settlement.
Third, the lower court erred in disregarding three essential holdings from Actavis, which addressed (1) the public policy in favor of settlement, (2) parties’ inability to settle cases without exclusion payments, and (3) the burdens imposed on plaintiffs.
The lower court conceded that it “is of relatively little import whether a payment for delay is made in the form of cash or some other form of consideration” since either scenario would allow a brand firm to “pay a would-be generic competitor to stay out of the market” and threaten “significant adverse effects on competition.” The court also lamented that its ruling would allow the settling parties to “evade Sherman Act scrutiny” as long as they “take the obvious cue to structure their settlements in ways that avoid cash payments.”
This brief concludes that the court was correct that exclusion-payment settlements have significant anticompetitive effects and that its formalistic ruling would lead to evasion. But it failed to realize that such an unfortunate outcome was the result of its own creation, in contradiction of Actavis and ordinary pleading rules. Because affirmance of this ruling would render the landmark Actavis decision a dead letter, the brief urges the First Circuit not to follow such an ill-advised path.
Keywords: patent, antitrust, drugs, pharmaceuticals, authorized generics, settlements, reverse payments, exclusion payments, Hatch Waxman Act, Loestrin
JEL Classification: I18, K21, L40, L41, L43, L65, O34, O38
Suggested Citation: Suggested Citation