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From Antitrust Law Daily, May 21, 2018

ALJ dismisses FTC’s ‘pay-for-delay’ case against Impax over Opana ER pact

By Jeffrey May, J.D.

Calling the anticompetitive harm resulting from a 2010 reverse payment patent settlement agreement between Endo Pharmaceuticals Inc. and generic drug maker Impax Laboratories, Inc. "largely theoretical," an FTC administrative law judge has dismissed agency litigation challenging the pact. Attorneys for the FTC had alleged that Impax and Endo illegally agreed that Impax would not compete by marketing a generic version of Endo’s pain medication Opana ER until January 2013 to settle patent litigation brought by Endo against Impax. In exchange for agreeing to drop its patent challenge and to delay launching its generic version of Opana ER, Impax was allegedly paid more than $112 million by Endo. However, the ALJ, balancing the anticompetitive harm and procompetitive benefits posed by the agreement, concluded that the agreement did not amount to an unreasonable restraint of trade (In the Matter of Impax Laboratories, Inc., Dkt. No. 9373).

The case has proceeded against Impax only, as Endo agreed to settle the charges. Under the settlement, announced in January 2017, Endo and its subsidiaries were barred from entering into the type of anticompetitive patent settlements that Endo had allegedly used to eliminate the risk of generic competition.

Rule of reason analysis. The ALJ noted that this was the FTC’s first administrative enforcement action challenging an alleged reverse-payment patent settlement agreement since the Supreme Court’s decision in FTC v. Actavis, Inc. Applying Actavis and subsequent pay-for-delay decisions, the ALJ considered whether the Endo-Impax settlement provided "payment for delay, or, in other words, payment to prevent the risk of competition." It rejected the notion that anticompetitive effects could be demonstrated solely by proof of a large payment and market power, noting that this approach would lead to an "unduly truncated burden of proof." For the second step of the rule of reason inquiry, the ALJ considered evidence of procompetitive effects arising from the Endo-Impax settlement. In the third step, the ALJ considered whether the evidence proved that the demonstrated procompetitive benefits of the settlement could have been achieved with a less restrictive agreement. Lastly, the ALJ weighed the demonstrated anticompetitive effects against the demonstrated procompetitive effects to determine whether the agreement was anticompetitive on balance.

Application of analysis. Considering the size of the reverse payment conferred under the agreement, the ALJ concluded the FTC attorneys met their initial burden of proving an anticompetitive harm. The evidence also demonstrated that Endo had market power in the relevant market for oxymorphone ER. Impax, on the other hand, met it burden of proving that the agreement had procompetitive benefits. When the burden shifted to Complaint Counsel to demonstrate that the procompetitive benefits could have been achieved with a less restrictive agreement, it was unable to do so. Thus, the final step was balancing the anticompetitive and procompetitive effects of the agreement.

"Actual consumer benefits outweigh[ed] the theoretical anticompetitive harm demonstrated in this case," said the ALJ. "Even if it is assumed that Impax would have entered the market as early as June 2010, and that the settlement therefore delayed generic entry (and extended Endo’s patent monopoly) for two and a half years, the demonstrated consumer benefits of the settlement still outweigh the anticompetitive harm because the settlement enabled and allowed uninterrupted and continuous access to generic Opana ER for more than five years."

Attorneys: Markus H. Meier for FTC. Edward D. Hassi and Michael E. Antalics (O’Melveny & Myers LLP) for Impax Laboratories, Inc.

Companies: Endo Pharmaceuticals Inc.; Impax Laboratories, Inc.

MainStory: TopStory Antitrust FederalTradeCommissionNews

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