Brief Amici Curiae of 48 Law, Economics, and Business Professors and the American Antitrust Institute in Support of Appellants

Abstract

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 In re Effexor, the District of New Jersey court erred in requiring plaintiffs to produce, at the motion-to-dismiss stage, evidence typically considered at summary judgment or trial. The court's opinion is inconsistent with Actavis, the Third Circuit's Lamictal decision, and pleading standards articulated in the Supreme Court's Twombly and Iqbal rulings. On behalf of 48 professors and the American Antitrust Institute, this Third Circuit amicus brief urges reversal.

The brief first argues that Actavis would be significantly undermined if courts could impose excessive standards at the pleadings stage that effectively make it impossible for plaintiffs to succeed on a claim despite allegations of conduct that violates the antitrust laws and costs consumers hundreds of millions of dollars.

The brief next contends that the excessive pleading requirements imposed are not consistent with Lamictal, as the Third Circuit made clear that Actavis applies to non-cash payments, in particular settlements in which brands agree not to introduce their own version of generics (known as "authorized generics" or "AGs") that would compete with true generics. Entry by an authorized generic threatens to cut true generics' revenues in half in the 180-day exclusivity period reserved for the first generic to challenge a brand firm's patent, claiming invalidity or infringement. For that reason, it is common business practice in the pharmaceutical industry to recognize that brands' promises not to introduce AGs are extremely valuable to generics and entail sacrifice by the brand that cedes the revenue it would gain from selling generics.

Finally, in manufacturing heightened pleading thresholds, the Effexor court misread Twombly, Iqbal, and Third Circuit opinions. And it ignored the well-pleaded components of a complaint that alleged (1) an 11-month delay in marketing an authorized generic; (2) well-documented findings of the effects of AGs on first-filing generics; (3) reference to a drug with similar revenues for which an AG reduced revenues by hundreds of millions of dollars in a period roughly half as long; and (4) a lopsided comparison of the value provided by the no-AG agreement with litigation costs.

Keywords: patent, antitrust, drugs, pharmaceuticals, authorized generics, settlements, reverse payments, exclusion payments, Hatch Waxman Act, Effexor

JEL Classification: I18, K21, L40, L41, L43, L65, O34, O38