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Aug. 10 — A ruling narrowing the relevant market in a pay-for-delay case involving Boehringer Ingelheim Pharmaceuticals Inc.'s Aggrenox is likely a win for the plaintiffs ( In re Aggrenox Antitrust Litig., 2016 BL 256350, D. Conn., No. 3:14-md-2516 (SRU), 8/8/16 ).
The order from Judge Stefan R. Underhill of the U.S. District Court for the District of Connecticut, defining the relevant market in the case as Aggrenox (dipyridamole/aspirin tablets) and its generic equivalents, likely will make it easier for the plaintiffs to establish an antitrust violation in the case. Aggrenox is a stroke prevention drug.
“This is a big win for the plaintiffs,” Herbert Hovenkamp, a professor of law at the University of Iowa in Iowa City, told Bloomberg BNA Aug. 10.
“Limiting the market to the pioneer drug and its generic equivalents means that the parties almost certainly have enough market power to establish an antitrust violation,” he said. “It's a continuing hurdle for defendants where the reverse payment is large, unless there's some very, very close substitute and those are rare in pioneer drug cases.”
Pay-for-delay or reverse-payment settlements are patent litigation settlements that generally involve payments from branded drug companies to generic drug companies in exchange for delaying the generic from reaching the market.
In the Aggrenox litigation, end payers and direct purchasers of Aggrenox claim that a 2008 patent litigation settlement agreement between Boehringer Ingelheim Pharmaceuticals and Barr Pharmaceuticals Inc. (now a subsidiary of Teva Pharmaceutical Industries Ltd.) violated the antitrust laws.
The settlement included a co-promotion agreement in which Boehringer paid Barr more than $120 million. The plaintiffs claim that the deal was really an illegal and unjustified reverse payment to Barr for agreeing to delay entering the market with its generic version of Aggrenox.
In the antitrust litigation over the settlement, the defendant drug companies sought expansive discovery relating to other drugs in the broader market of antiplatelet treatments.
But Underhill said that discovery or evidence related to other drugs as potential substitutes wasn't relevant.
However, he certified an immediate appeal of his order, which will allow any party to pursue an appeal within 10 days.
Underhill said his opinion was an attempt to “provide some of the missing structure” that the Supreme Court left open in FTC v. Actavis, Inc., 133 S.Ct. 2223, 2013 BL 158126, (2013), (11 PLIR 771, 6/21/13).
In Actavis, the high court held that drug patent litigation settlements, including large and unjustified payments, are subject to antitrust scrutiny under a rule of reason analysis. The details of that analysis, however, were left to district courts to define.
Actavis didn't directly address market definition or market power. Instead, the Supreme Court said the size of the payment is “a strong indicator of … the power to charge prices higher than the competitive level,” but doesn't prove there is liability. It also declined to hold that a patent guarantees market power.
“Various district courts have struggled to fill the gaps that Actavis left open, and not always with consistent results,” Underhill wrote.
The Aggrenox case, Underhill said, “is an important case in the relatively new landscape of Actavis actions, and this opinion is an effort to provide some of the missing structure.”
Michael Carrier, a professor of law at Rutgers Law School in Camden, N.J., told Bloomberg BNA Aug. 9 that Underhill's “ruling offers the most comprehensive discussion of market power since Actavis.”
“The court thoughtfully engages with Actavis in linking market power and payments,” Carrier said.
In the opinion, Underhill said that a company's market power lies in its ability to charge supracompetitive prices—prices higher than the competitive level—in the relevant market. The relevant market in this case, he said, is determined by the nature of the challenged patent settlement agreement.
“[A]s a practical matter, the only ‘relevant' market in this case, and in similar cases brought under FTC v. Actavis, will be the market in which the challenged settlement agreement allegedly acted as an anticompetitive restraint: that is ... it will be implicitly defined by the scope of the disputed patent,” Underhill wrote.
And, the judge said, while Actavis didn't hold that a large reverse payment is dispositive of antitrust liability or that a patent guarantees market power, “patents are only valuable as a result of whatever market power they confer, and they are more or less valuable precisely in proportion to that market power.”
And he said, the “size and circumstances of the reverse payment” can indicate the level of market power conferred by the patent.
Large payments create a greater likelihood that a patent has conferred a “high degree of market power” and a “stronger inference” that the payment was intended “to maintain supracompetitive prices to be shared among the patentee and the challenger rather than face what might have been a competitive market,” he said.
“A large reverse payment is itself suggestive of market power,” he wrote, “but the ability to profitably charge supracompetitive prices over a sustained period (which ability the reverse payment may be calculated to preserve) is conclusive of market power, by definition.”
But the circumstances under which supracompetitive prices are charged are significant in determining antitrust liability, he said.
“Aggrenox was protected by a patent, which granted the legal right to exclude generic competition and the practical ability to profitably charge higher prices than generic competitors would charge,” he wrote. “There is nothing wrong with exercising that ability during the valid life of the patent, but wrongly extending that ability through a large reverse payment would violate the antitrust laws.”
“Thus, the critical question in this case, indeed the only real question affecting liability, is whether the defendants acted wrongfully to extend the patent monopoly beyond its expected life.”
Underhill said his ruling “will have a significant impact on this case and perhaps in other cases, and the stakes are high for both the litigants and the court.”
Noting the “relatively technical” nature of the economic issues addressed in the opinion, Underhill acknowledged that “their application to antitrust law is not without debate, nor is the caselaw touching on them uniform.”
“If this ruling is reversed after final judgment, the litigation will effectively start anew, requiring extensive discovery beginning years from now,” he wrote.
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Text of the court's decision is at http://src.bna.com/hzc .
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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