ViroPharma’s Escape From Suit Could Limit FTC Enforcement

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Dana A. Elfin Washington Editor Randy Kubetin Washington Managing Editor

By Dana A. Elfin

Shire PLC subsidiary ViroPharma has extricated itself for now from a lawsuit alleging the drug manufacturer violated antitrust laws by submitting numerous petitions to the FDA.

The Federal Trade Commission didn’t have the authority to bring the suit against the drug company in the first place, Judge Richard G. Andrews of the U.S. District Court for the District of Delaware said, tossing the FTC’s suit. The judge said the FTC failed to sufficiently allege facts to show ViroPharma was violating or was about to violate the antitrust laws. But the judge said the FTC can amend its complaint and refile.

“I do not think these allegations, without more, plausibly suggest ViroPharma is ‘about to violate’ any law enforced by the FTC, particularly when the alleged misconduct ceased almost five years before filing of the complaint,” Andrews wrote.

The decision could potentially curb the FTC’s powers to sue drug manufacturers for past antitrust violations, antitrust attorneys tell Bloomberg Law, and may eventually lead to a rewrite of the FTC statute to give the FTC the authority to sue for such violations.

But drug companies shouldn’t breathe easy yet because the ruling doesn’t let drug companies off the hook for possible antitrust violations when they file citizen petitions with the Food and Drug Administration. Citizen petitions ask the FDA ask to take action, in this case action affecting pending generic drug applications.

The FTC’s suit against ViroPharma marks the first time the commission has sued a drug company for allegedly abusing the citizen petition process.

Baseless Citizen Petitions Alleged

The FTC alleges ViroPharma violated the antitrust laws by filing dozens of baseless citizen petitions with the Food and Drug Administration from 2006 to 2012 to delay entry of a generic version of its antibiotic Vancocin D. The FTC alleges the company sought to protect monopoly profits by filing “serial, repetitive, and unsupported filings” with the Food and Drug Administration, costing buyers hundreds of millions of dollars.

On the enforcement side, the decision in the FTC’s case against ViroPharma “is a result that the FTC is not going to be happy about,” Christopher L. Sagers, a law professor at Cleveland State University, told Bloomberg Law March 22. “All agencies are jealous of their jurisdiction and their enforcement power.”

And for drug companies, the decision “means that pharmaceutical companies participating in the FDA’s citizen petition process are not necessarily immune and still face antitrust risks,” Alexis Gilman, a former FTC official, now with Crowell & Moring LLP in Washington, told Bloomberg Law March 23.

The ruling is a “good news-bad news” decision for the FTC, Michael A. Carrier, a professor at Rutgers Law School in Camden, N.J., who has authored multiple studies of citizen petitions, told Bloomberg Law March 22.

“It’s a significant decision on both FTC injunctive relief and the application of the Noerr-Pennington doctrine to citizen petitions,” Carrier said.

In injunctive relief, a court orders a defendant to stop a specific act or behavior. The Noerr-Pennington doctrine provides immunity from antitrust liability for petitioning activity unless the petitions filed with the government can be shown to be “sham"—or groundless—petitions.

Boost for Citizen Petitions

The good news for the FTC is that the decision is “a strong boost for citizen-petition challenges,” Carrier said. The district court didn’t dismiss the FTC’s complaint based on the defendant’s Noerr-Pennington defense but instead dismissed it because there was no ongoing or imminent antitrust violation.

The FTC alleged ViroPharma violated the antitrust laws by filing dozens of baseless citizen petitions with the Food and Drug Administration from 2006 to 2012 to delay entry of a generic version of its antibiotic Vancocin D. The FTC alleges the company sought to protect monopoly profits by filing “serial, repetitive, and unsupported filings” with the Food and Drug Administration, costing buyers hundreds of millions of dollars.

The agency believed it cleared the “sham exception” to Noerr-Pennington antitrust immunity in the case based on ViroPharma’s multiple citizen petition filings.

The judge agreed, and found the FTC’s allegations, at this preliminary stage of the litigation, were sufficient to overcome defendant’s “presumptive antitrust immunity” because factual questions existed about whether the petitions were shams.

Need Ongoing, Imminent Violation

The bad news for the agency is the court said that before the FTC can obtain a permanent injunction barring certain company conduct, it must show the company is violating or about to violate the law,

“This is a case in which the district court is saying equitable relief isn’t available if you can’t show evidence the violation is continuing or the company is likely to do it again,” Richard A. Samp, chief counsel of the Washington Legal Foundation, told Bloomberg Law in a March 22 telephone call.

In the ViroPharma case, Samp said, the branded drug at issue has long since gone generic and the violation is over, so the FTC isn’t entitled to injunctive relief.

“The decision is significant because it’s a setback for the FTC’s ability to seek a permanent injunction and obtain a disgorgement remedy in federal court for past conduct that the agency views as anticompetitive,” Gilman said. Disgorgement, or repayment, is an equitable remedy through which ill-gotten gains can be recouped from defendants.

Sagers told Bloomberg Law he’s “a little surprised” the interpretation of how broad the FTC’s enforcement powers are is still unresolved, given that the statute was enacted about 45 years ago. “This is apparently the first time it has ever been squarely raised in litigation,” he said.

The practical effect of the ruling, according to Sagers, is to limit the FTC’s challenges to past anticompetitive conduct to internal administrative proceedings.

Appeal Possible

“Because the decision is likely to have implications for the FTC’s broader enforcement activity, I wouldn’t be surprised if the FTC appealed the decision,” Gilman said.

“I suspect if this case were to get to the [U.S. Court of Appeals for] the Third Circuit and it decides the FTC’s equitable powers are not as broad as they think they are, it’d have a real impact, Samp said. WLF is a public-interest law firm and policy center devoted to advocating for free-market principles.

If the statute isn’t interpreted as broadly as the FTC would like, it’s possible the FTC would go to Congress seeking a rewrite of the statute, he said. “The FTC’s statute is written in such a way that it give the FTC as much power as it would like,” Samp said. “In general, they’re limited to equitable remedies.”

But David Balto, an antitrust lawyer in private practice in Washington, said the Third Circuit, which has extensive background in pharmaceutical antitrust cases, is likely to poke holes in the district court’s analysis. The appellate court is “likely to tell him [Judge Andrews] about the significant mistakes he’s made,” Balto, a former policy director at the Federal Trade Commission, told Bloomberg Law in a March 22 telephone call.

“This an area of the law that really needs to clarified,” Balto, a former policy director at the Federal Trade Commission, said.

FTC Could Refile

Andrews’ ruling doesn’t necessarily spell the end of the road for the FTC’s case against ViroPharma even if there’s no appeal.

“Even if the FTC loses this battle or decides not to appeal, it’s not the end of the war,” Gilman said. “The district court said that the FTC could amend and refile its complaint in the case. That might allow the FTC to refile the complaint to allege that the defendant ‘is about to violate’ the law, which would address the court’s rationale for dismissing the case,” he said.

“The FTC might be able to successfully amend its complaint by following the roadmap the court laid out … at oral argument about future violations” involving Shire’s drug Cinryze, which treats hereditary angioedema, Carrier said.

The FTC is still reviewing the decision and wouldn’t comment on its plans, Betsy Lordan, senior public affairs specialist at the FTC, told Bloomberg Law March 23.

Similarly, Shire PLC had no comment on the ruling, Shire spokeswoman Katie Joyce told Bloomberg Law March 22.

The case is FTC v. Shire ViroPharma, Inc. , 2018 BL 95661, D. Del., No. 17-131-RGA, 3/20/18 .

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bloomberglaw.com

To contact the editor responsible for this story: Randy Kubetin at rkubetin@bloomberglaw.com

For More Information

The ruling is at http://src.bna.com/xgN.

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