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From Antitrust Law Daily, November 28, 2017

Pfizer requests High Court review of Third Circuit’s Lipitor holding

By Jody Coultas, J.D.

Pfizer Inc. has asked the Supreme Court to review a decision by the U.S. Court of Appeals in Philadelphia to revive challenges by direct purchasers and end payors of alleged reverse-payment settlement agreements between Pfizer and generic drug manufacturer Ranbaxy Inc. regarding a generic version of the brand-name cholesterol drug Lipitor (Pfizer Inc. v. Rite Aid Corp.Dkt. 17-752).

Ranbaxy had launched a generic version of Pfizer’s Accupril, which caused Pfizer a $450 million loss in sales in one year. Pfizer sued Ranbaxy for patent infringement and was likely to prevail, with Ranbaxy potentially liable for substantial damages in lost profits. Despite this, the parties reached a settlement agreement whereby Ranbaxy agreed to pay Pfizer $1 million—much less than its potential liability under Pfizer’s lawsuit.

Plaintiffs alleged that the generic Accupril settlement was an anticompetitive inducement to ensure a delay in Ranbaxy’s release of a generic version of Lipitor. The district court found that the settlement was commonplace, and that plaintiffs had not sufficiently alleged that the payment was "large" and "unjustified."

The Third Circuit ruled that the lower court had improperly applied a heightened "probability" standard of pleading, rather than the appropriate "plausibility" standard. Plaintiffs were not required to meet any special valuation requirement. Even if a justification for the reverse payment was ultimately shown to exist, that possibility did not justify dismissing the plaintiffs’ complaint, the court stated. The plaintiffs sufficiently alleged the absence of a convincing justification for the reverse payment and were not required to plead more than that.

The court noted that the U.S. Supreme Court had ruled in FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013), that reverse payment settlement agreements—under which a patentee pays the alleged infringer in return for the infringer’s agreement not to produce the patented item—could give rise to antitrust liability. Under Actavis, reverse payments may be anticompetitive if the basic reason for the payment is a desire to maintain and to share patent-generated monopoly profits, which may be shown by if the payment is large and unjustified by traditional settlement considerations. The court also noted that the payment need not be in cash form; it could take the form of a "no-AG" agreement whereby the brand-name manufacturer agrees to refrain from producing an authorized generic (AG) which would compete with the generic manufacturer’s product.

On appeal to the Supreme Court, Pfizer argues that the Third Circuit allowed plaintiffs to cherry-pick isolated terms in an otherwise routine patent litigation settlement agreements and allowed plaintiffs to subject those agreements to scrutiny under the antitrust laws.

Pfizer argues that the appellate court contravened Actavis, and will impose immense financial costs, prevent virtually any patent case from being settled without trial (much less resolved before expensive discovery), chill litigants’ efforts to achieve "global peace" by settling multiple patent cases concurrently, and ultimately harm the very consumers the court claimed it was protecting.

The petition asks "whether an antitrust complaint alleging a "large" and "unjustified" reverse payment settlement agreement states a plausible claim for relief when it cherry-picks among pieces of a larger agreement to conjure a purported transfer of value from a patentee to patent challenger, but does not account for the net flow of consideration."

For details about this and other petitions and cases pending before the Supreme Court, please consult a chart, concerning antitrust and trade regulation issues before the 2017 Term of the U.S. Supreme Court.

Attorneys: Jay Philip Lefkowitz, John C. O’Quinn, Michael D. Shumsky, Jonathan D. Janow, and Andrew C. Lawrence (Kirkland & Ellis LLP) for Ranbaxy Inc., et al. Robert A. Milne, Raj S. Gandesha, Bryan D. Gant, and Sheryn George (White & Case LLP) for Pfizer Inc., et al.

Companies: Rite Aid Corp.; Pfizer Inc.; Ranbaxy Laboratories Ltd.; Wyeth, Inc.; Teva Pharmaceutical Industries, Ltd.

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