Antitrust Law Daily Unsealing of Drug Maker's Pay-for-Delay Settlement Analysis Was Proper
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Thursday, March 21, 2013

Unsealing of Drug Maker's Pay-for-Delay Settlement Analysis Was Proper

By E. Darius Sturmer, J.D.

A confidential corporate document offering a financial analysis of a branded drug's profits and of the appropriate terms of a potential pay-for-delay settlement with generic competitors was properly unsealed by a federal court, the U.S. Court of Appeals in Atlanta has ruled. The lower court's decision was therefore affirmed, and a stay of that judgment was vacated (FTC v. AbbVie Products LLC, March 21, 2013, Marcus, S.).

The document at issue, called the "Project Tulip Financial Analysis," (PTFA) was created by Solvay Pharmaceuticals, which is now known as AbbVie Products LLC. It projected the profits of Solvay's popular, patented topical testosterone gel AndroGel in the face of prospective generic competition, and it discussed the appropriate terms of—and benefits from—a settlement between Solvay and those competitors.

The document was voluntarily disclosed during the course of an FTC investigation into the legality of a pay-for-delay settlement that did ultimately occur among the drug companies and became the sole exhibit to the agency's eventual antitrust complaint against them. However, in 2010, Solvay convinced a district court judge in the Northern District of Georgia to issue a protective order sealing the PTFA because the document contained sensitive financial information that could be harmful to Solvay's business interests.

Although the FTC's suit was dismissed, a ruling upheld on appeal, the U.S. Supreme Court has issued a writ of certiorari to review the appellate court's decision. The FTC returned to the district court and asked for the PTFA to be unsealed so that the FTC and its amici could discuss the document openly in the Supreme Court. The district court did so through modification of the protective order, basing its action in large part on a finding that the harms Solvay would suffer from the document being made public have been reduced in the intervening three years.

The appellate court rejected Solvay's contentions that the district court committed several separate errors each qualifying as an abuse of discretion. First, Solvay claimed that the district court erred by treating the document as a judicial record to which the strong presumption of public access applies. To the same extent that the FTC's complaint was a judicial record, so too was the attached PTFA, the court said. The company offered no precedent for its proposal that the court create a narrow exception for "confidential, previously sealed documents." Furthermore, neither the district court nor the appellate court relied at all on the document in dismissing or affirming the dismissal of the underlying antitrust case, the court observed.

Second was Solvay's assertion that the district court erred as a matter of law by failing to apply the right standard to the motion. According to Solvay, the court should have modified its order only if the FTC demonstrated "extraordinary circumstances," not merely good cause. The combination of the first two errors led the district court to presume the document should have been unsealed rather than placing a heavy burden on the FTC to show why the document should be unsealed, Solvay argued. "But Solvay waived this argument by not raising it in the district court and, indeed, invited the claimed error by affirmatively arguing before the district court for application of the good-cause balancing test rather than the extraordinary-circumstances test it now advocates," in the appellate court's view.

Next, the district court's purported failure to consider Solvay's reliance on the protective order did not amount to an abuse of discretion, the court held. "As the FTC accurately points out," noted the court, "Solvay could not have relied on a protective order to disclose the [PTFA] because Solvay disclosed [the document] before it moved for and received the protective order." The FTC's promise of confidentiality amounted only to a pledge that "the information would remain confidential unless and until the FTC filed suit against Solvay, at which point Solvay would be entitled to seek a protective order," in the court's view. Notably, the FTC's regulations do not guarantee that, if Solvay failed to obtain a protective order, the FTC would withdraw the confidential material. Thus, to the extent that Solvay relied on the FTC's promise, the FTC effectively promised Solvay only the opportunity to apply for a protective order to seal the document.

Lastly rejected was the argument that the lower court had failed to recognize that the balance of equities weighed strongly in favor of keeping the document under seal. Solvay insisted that the competitively sensitive data in the document retains the potential to harm the company in its rebate negotiations and with regard to competitors' pricing of their products. Citing "substantial evidence" presented by the FTC that it would no longer be as damaging to Solvay, however, the court concluded that "this is the quintessential case where there are two permissible views of the evidence, and therefore the district court's finding that the likelihood of injury has been ameliorated over time cannot be clearly erroneous."

The case is No. 12-16488.

Attorneys: Mark S. Hegedus for the Federal Trade Commission. Jeffrey I. Weinberger (Munger Tolles & Olson, LLP) for AbbVie Products LLC.

Companies: AbbVie Products LLC.

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