U.S. FTC files an amicus brief in the Court of Appeal urging to reverse the District Court finding in the Lamictal Direct Purchase Antitrust Litigation

By Nicole Daniel

On 28 April, 2014 the Federal Trade Commission (“FTC”) field an amicus brief in the Court of Appeals for the Third Circuit in the Lamictal Direct Purchase Antitrust Litigation urging the court to reverse the District Court finding in this case.

In the Lamictal Direct Purchase Antitrust Litigation the plaintiffs allege that Teva Pharmaceuticals (“Teva”) was paid by GlaxoSmithKline (“GSK”) to forgo entry of their authorized generic version of the Lamictal drug in return for GSK’s promise not to compete. The district court decided that this agreement which included GSK’s commitment not to introduce an authorized generic does not violate antitrust laws under FTC v. Actavis since this agreement did not involve the exchange of cash.

In its amicus brief the FTC explains why the conclusion of the District Court is wrong. In the Actavis case the Supreme Court held that reverse-payment patent settlements are to be evaluated using antitrust factors, i.e. they are not immune from antitrust scrutiny.

The District Court in the Lamictal case distinguished the agreement from the Actavis case as the compensation took the form of an agreement not to compete in contrast to compensation in cash.

The amicus brief explains that the commitment not to compete raises the same antitrust concerns which were identified by the Supreme Court in Actavis.

An empirical study by the FTC showed that consumers pay higher prices for the generic product if the brand company itself does not introduce an authorized generic during the exclusivity period for the first-filing generic under the Hatch-Waxman Act.

The amicus brief further states that in the Actavis decision no distinction between the forms of compensation for potentially problematic reverse-payment settlements is made. Accordingly the narrow reading of the District Court may serve to undermine the Supreme Court’s decision in the Actavis case and lead to potentially anticompetitive reverse-payment settlements being structured as to avoid cash and therefore antitrust scrutiny.

The FTC, in its amicus brief, additionally explains that the Supreme Court in the Actavis case affirmed that antitrust principles apply to agreements between a brand-name and a generic competitor undertaking as well as settlements between potential competitors with reciprocal agreements not to compete.

It will have to be seen how the Court of Appeal will decide this issue.

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