The U.S. Court of Appeals for the Third Circuit Concludes that the Actavis Ruling Applies to Non-Cash Payments (Lamictal)
e-Competitions Bulletin, No. 75208, August 2015
4 Pages Posted: 5 Sep 2015
Date Written: August 27, 2015
In the area of drug patent settlements, the Third Circuit’s ruling in King Drug Co. of Florence v. Smithkline Beechham Corp. (Lamictal) is the most important federal decision since FTC v. Actavis. Since the Supreme Court’s ruling, district courts have split on whether “payment” applies beyond cash. Most courts have correctly found that it does. But the district courts in Lamictal and In re Loestrin 24 FE Antitrust Litigation found that it does not. This is a critical issue.
This article summarizes the Lamictal ruling. The court addressed the harm from settlements by which brand-name drug companies promise generics not to introduce their own version of generics (known as “authorized generics” or “AGs”). The court explained how no-AG promises could be as anticompetitive as cash payments, offer significant value to generics, and reveal brand sacrifices. It rejected arguments that such promises are exclusive licenses immune from antitrust scrutiny. And it overturned the lower court’s conclusion that the settlement at issue was reasonable, as it found that plaintiffs sufficiently pled an antitrust violation and that the rule-of-reason analysis was reserved for the factfinder.
The article concludes that the Lamictal opinion was consistent with the language of Actavis and the economics of the pharmaceutical industry and was a crucial decision that ensures a role for antitrust scrutiny of potentially anticompetitive drug patent settlements.
Keywords: Pharmaceuticals, settlements, reverse payments, pay for delay, patent, antitrust, authorized generics, Hatch Waxman, brands, generics
JEL Classification: I18, K21, L40, L41, L43, L65, O34, O38
Suggested Citation: Suggested Citation