Antitrust Law Daily AndroGel reverse payment antitrust suit headed to trial after summary judgment denied
Friday, June 15, 2018

AndroGel reverse payment antitrust suit headed to trial after summary judgment denied

By E. Darius Sturmer, J.D.

A consolidated FTC enforcement suit and private class action challenging a purported reverse payment settlement involving the testosterone replacement drug AndroGel as illegally anticompetitive under federal antitrust laws should proceed to trial, the federal district court in Atlanta has decided. The court rejected motions by defendants Solvay Pharmaceuticals, Inc., Actavis, Inc., Actavis Holdco, Inc., Paddock Laboratories, Inc., and Par Pharmaceuticals asserting numerous grounds for summary judgment in their favor. However, summary judgment was granted to Solvay as to the retailer’s damages claims on certain AndroGel purchases, and the court also granted in part a motion by several defendants to exclude some of the proposed testimony of one of the plaintiffs’ experts (In re AndroGel Antitrust Litigation (No. II), June 14, 2018, Thrash, T.).

The backdrop of the litigation began in February 2000, when the Food and Drug Administration (FDA) approved Solvay’s new drug application for AndroGel, giving the company three years of market exclusivity, during which time it also was issued a patent on the drug. AndroGel quickly became the most popular form of testosterone replacement therapy, with over $1.8 billion in sales from 2000 to 2007. After the exclusivity period ended in 2003, Actavis and soon thereafter Paddock filed abbreviated new drug applications (ANDAs) with the FDA, seeking to sell generic versions of the drug. Solvay then asserted its patent rights, bringing a patent infringement suit against both would-be generic competitors. While that suit was pending, the FDA approved Actavis’ ANDA, though it continued to stay Paddock’s. Before the infringement actions were decided, and before any generic version entered the market, however, Solvay entered into one settlement agreement with Actavis and another with Paddock and Par, which had partnered with Paddock to market and share profits on the drug.

The settlements resolved the infringement actions in exchange for each prospective generic seller’s agreement not to market generic AndroGel until August 2015 or later unless another company brought a generic to market earlier. At the same time, Solvay entered into separate profit sharing agreements with Actavis, Par, and Paddock, under which each of the companies agreed to a share of AndroGel’s profits for promoting or serving as a backup supplier of the branded drug.

The settlements prompted an FTC investigation in 2008 that culminated in the filing of antitrust actions by the FTC and a number of private parties in 2009. After the cases were consolidated and transferred to the present court, the court in 2010 dismissed the FTC’s action for failure to state a claim. That ruling was eventually reversed and remanded by the Supreme Court in FTC v. Actavis, 570 U.S. 136 (2013), and litigation resumed.

Daubert motions. In its latest ruling, the court first addressed the defendants’ motions to exclude the testimony of two of the plaintiffs’ purported expert witnesses. The court found no merit in the defendants’ contentions that the plaintiffs’ patent law expert—who was to testify as to how a reasonable and competent attorney would have advised litigants in Solvay’s or the generics’ positions at the time they settled the underlying patent litigation—was unqualified or offered an unreliable methodology. However, the other expert was barred by the court from testifying on the valuation of the backup manufacturing agreement (BMA) between Solvay and Par/Paddock, as his failure to offer a quantitative valuation of the BMA precluded him from being able to assign a specific monetary value for the BMA.

Antitrust conspiracy, competitive effects. The court next rejected motions for summary judgment on the theories that the plaintiffs had failed to demonstrate conspiracy to restrain trade or anticompetitive effects. Pointing to the settlement agreements as direct evidence of conspiracy, the court remarked that "[n]ot only is there enough evidence for a jury to find that there was an agreement, it is doubtful that a reasonable jury could find otherwise."

Whether the settlement agreements actually harmed consumers—in the form of higher prices through the delay of generic entry into the market—required a deeper analysis into the size of the payments in comparison to "what could reasonably be expected to cover such traditional settlement concerns as future litigation costs of the value of services rendered," in the court’s view. The plaintiffs presented significant evidence from the negotiation of the settlements to suggest that the co-promotion agreements (CPAs) and BMA were "merely an afterthought to the defendants, the proverbial lipstick on the pig that was the delay in generic entry," the court observed. Moreover, they offered evidence suggesting that the BMA and the CPA in the Par/Paddock settlement "were merely vehicles to facilitate" large and unjustified payments--$12 million per year—to the generics for delaying entry. "A reasonable jury could find that the settlements were structured so as to be more beneficial to everyone involved than a competitive market," the court concluded, and thereby showed enough to satisfy their prima facie burden, the court concluded.

Standing. An additional argument that the private plaintiffs lacked antitrust standing was also rejected. While it was not possible to definitively determine whether the generics ultimately would have prevailed on the underlying patent litigation, so their at-risk market-entry theory of causation did not provide a basis for standing. However, the plaintiffs had standing by virtue of their showing that but-for the reverse payment the defendants would have come to an alternative, legal settlement that would have allowed for generic entry earlier than 2015. A lack of injury regarding an AndroGel 1.62% formulation precluded the plaintiffs from standing to pursue damages related to that product.

The case is No. 1:09-MD-2084-TWT.

Attorneys: Randall W. Weinsten for the FTC. James F. Hurst (Kirkland & Ellis LLP) and Julia K. York (Skadden Arps Slate Meagher & Flom LLP) for Actavis, Inc. Joshua S. Meltzer (Munger, Tolles & Olson, LLP) for Solvay Pharmaceuticals, Inc. Justin P. Raphael (Munger, Tolles & Olson, LLP) for Abbvie Products LLC.

Companies: Actavis, Inc.; Solvay Pharmaceuticals, Inc.; Abbvie Products LLC

MainStory: TopStory Antitrust GeorgiaNews

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