FTC Seeks to File (Again) Amicus Brief in EFFEXOR XR “No-AG” Agreement Antitrust Case; Plaintiffs in Similar LAMICTAL Case Seek Reconsideration of Dismissal

By Kurt R. Karst –      

Late last week, the Federal Trade Commission (“FTC”) announced that it had filed a motion asking the U.S. District Court for the District of New Jersey to accept an amicus brief in In re Effexor XR Antitrust Litigation concerning the application of the U.S. Supreme Court’s June 2013 decision in Federal Trade Commission v. Actavis, Inc., __ U.S. __, 133 S. Ct. 2223 (June 17, 2013), which dealt with drug patent settlement agreements (aka “reverse payment agreements” or “pay-for-delay agreements”) and the appropriate antitrust analysis to apply to them (see our previous post here), to drug patent settlement agreements containing a “No-AG” (i.e., no authorized generic) commitment.  This is the second time the FTC has asked the district court to accept an amicus brief in the case.  In the first go-round, the court (Judge Joel A. Pisano) denied the FTC’s motion for leave to file its amicus brief.

As we previously reported, In re Effexor XR Antitrust Litigation is private antitrust litigation concerning Wyeth Pharmaceuticals Inc.’s (“Wyeth’s”) anti-depressant drug EFFEXOR XR (venlafaxine HCl) Extended-release Tablets.  In a December 2011 Complaint, several direct purchasers allege that Wyeth, acting alone and/or in concert with first generic applicant Teva Pharmaceuticals USA, Inc. (“Teva”) violated Section 2 of the Sherman Act by delaying EFFEXOR XR generic competition. According to the Complaint:

Wyeth’s scheme included (i) fraudulently procuring three patents for extended release formulations of venlafaxine hydrochloride, (ii) wrongfully listing those patents in the FDA Orange Book as covering Effexor XR, (iii) engaging in serial sham litigation to block and delay multiple generic companies, (iv) entering into a horizontal market allocation and price-fixing agreement with generic manufacturer Teva, and (v) negotiating settlements with subsequent generic applicants to preserve and protect its monopoly and market-division agreement with first-filer Teva.

In particular, the direct purchasers note that as part of the settlement agreement “Wyeth gave Teva an exclusive license to sell a generic version of (instant release) Effexor before the original compound patent for venlafaxine expired.  Wyeth would both forgo marketing its own authorized generic during that period and allow Wyeth’s generic Effexor to come to market early” (emphasis in original).  This sort of arrangement has been referred to as a “No-AG” agreement.

The FTC, which said in a 2013 report that nearly one-half of brand-generic settlement agreements filed in Fiscal Year 2012 contain a No-AG commitment (see here), first asked the New Jersey District Court to file an amicus brief in the case in August 2012.  In denying the FTC’s motion, Judge Pisano found that “the FTC has not expressed an interest that is not represented competently in this case,” and that “the extent to which the FTC is partial to a particular outcome weighs against granting the agency’s motion.” 

Now, with the Supreme Court’s Actavis decision under its belt, the FTC apparently feels emboldened to ask the court a second time to chime in on the case.  (The case is now pending before Judge Peter G. Sheridan.)  According to the FTC’s motion, the district court should exercise its discretion to accept the FTC’s amicus brief for several reasons, including that the treatment of No-AG commitments has important and serious long-term public policy implications for all consumers.  The FTC is also critical of recent supplemental briefs filed in the case by Wyeth and Teva (here and here) (direct purchaser supplemental brief here).  For example, says the FTC:

Wyeth relies on mischaracterizations of the FTC’s arguments before the Supreme Court in Actavis to support its contentions about the meaning of “reverse payments.”  Further, Teva dedicated an entire page of one of its briefs on an erroneous claim that “the [FTC] determined that the exclusive generic licensing of a single manufacturer did not constitute a ‘payment’ to the generic challenger for the purpose of delaying entry.”  The plaintiffs in this case were not involved in the FTC’s decision-making in either of these instances, and they cannot competently represent what the FTC decided.

In its proposed amicus brief, the FTC contends that the antitrust allegations in the case concerning the No-AG agreement “raise the same type of antitrust concern that the Supreme Court identified in Actavis.”  Moreover, says the FTC, “accepting the defendants’ claim of immunity whenever patentees use vehicles other than cash to share the profits from an agreement to avoid competition elevates form over substance, and it would allow drug companies to easily circumvent the ruling in Actavis, at great cost to consumers.”

In re Effexor XR Antitrust Litigation is not the first case in which No-AG arrangements have been challenged – or in which the FTC has sought to lend its voice.  Just days after Judge Pisano denied the FTC’s motion for leave to file its amicus brief in the EFFEXOR case, the FTC asked the New Jersey District Court to file a similar amicus brief in In re Lamictal Direct Purchaser Antitrust Litigation.  As we previously reported, in that case, filed in early 2012, direct purchasers of certain anti-epileptic drug products containing the active ingredient lamotrigine and marketed by GlaxoSmithKline (“GSK”) as LAMICTAL say that GSK and Teva “delayed generic competition in the markets for Lamictal Tablets and Lamictal Chewables . . . and improperly manipulated the Hatch-Waxman Act to impede, rather than promote, generic competition as intended by the statute.”  Specifically, the direct purchasers allege that GSK and Teva violated Sections 1 and 2 of the Sherman Act when they entered into an agreement providing, among other thing, that GSK would not market an AG of Lamictal Tablets and Lamictal Chewables, and that such agreement was well beyond the exclusionary scope of a now-expired patent listed in the Orange Book for GSK’s lamotrigine drug products and constitutes a naked market allocation agreement.

In contrast to Judge Pisano, Senior District Judge William H. Walls granted the FTC’s motion to file an amicus brief in the case.  But in an unpublished December 2012 decision Judge Walls granted GSK’s and Teva’s Motions to Dismiss the case on the basis that a drug patent settlement agreement based on negotiated entry dates is not subject to antitrust scrutiny.  Specifically, because no monetary payment was alleged by plaintiffs, Judge Walls ruled that plaintiffs failed to state a cognizable antitrust claim (see our previous post here). 

In late July, the direct purchaser plaintiffs asked Judge Walls to reconsider his dismissal of the case.  The plaintiffs contend in their motion that, “consistent with Actavis, this Court’s analysis should include an examination of all of the circumstances surrounding Defendants’ settlement agreement, including, inter alia, the anticompetitive consequences of GSK’s agreement not to market an authorized generic and the specific amount of financial benefit this agreement conferred on Teva.”  Also, within a day of the FTC asking to file an amicus brief in In re Effexor XR Antitrust Litigation, the direct purchaser plaintiffs in In re Lamictal Direct Purchaser Antitrust Litigation cited the FTC’s proposed amicus brief in a letter to the court as supplemental authority on the issue of whether a No-AG agreement constitutes a reverse payment in the wake of Actavis.  In opposition briefs filed earlier this week (here and here), both GSK and Teva contend that Actavis reaffirms the discrict court’s prior decision that the only patent settlement agreements subject to antitrust scrutiny are those that are alleged to include a monetary payment from the brand manufacturer to the generic.