Oral argument in 1st appellate case to consider payment under Actavis

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 New Jersey district court in In re Lamictal held that such payments were limited to cash. On November 19, 2014, the Third Circuit is hearing oral arguments in the case. I filed a brief on behalf of 53 professors, the American Antitrust Institute, and Consumers Union that urges reversal of this very concerning decision. Exclusion payments today take myriad forms, with roughly half taking the form of “no-authorized-generic” agreements by which a brand agrees not to launch an authorized generic during the generic’s 180-day exclusivity period. Because the launch of an authorized generic dramatically reduces the generic’s profits, a brand’s promise not to introduce one provides substantial value to the generic. In holding that only cash payments are subject to antitrust scrutiny under Actavis, the Lamictal district court created a loophole large enough to accommodate an entire industry’s worth of supracompetitive profits and missed dosages. Nor would scrutiny of agreements like the one in this case, which provides the generic with a type of consideration it could never have obtained by winning a patent case, have any effect on legitimate settlements that fall within the boundaries of patent litigation. This case bears close watching. For if the Third Circuit upholds the decision below, form will trump substance and brands and generics will have carte blanche to enter into anticompetitive settlements.