AbstractOne of the most pressing issues in patent and antitrust law today involves agreements by which brand-name drug companies pay generic firms to delay entering the market. In June 2013, in FTC v. Actavis, Inc., the U.S. Supreme Court concluded that these “exclusion payment”1 settlements (in which exclusion comes from the payment rather than the patent) could have “significant anticompetitive effects” and violate the antitrust laws.
In ensuring a robust role for antitrust analysis, the Court handed down one of the most important business cases in the past generation. And it articulated a blueprint for future analysis based on antitrust law’s “rule of reason.” But the Court did not specify every step in the analysis or consider every type of settlement. Instead, it called on “lower courts . . . [to] structur[e] . . . the present rule-of-reason antitrust litigation.”
Along these lines, two recent district court rulings portend ominous signs. In the first case, In re Lamictal Direct Purchaser Antitrust Litigation, the District of New Jersey granted a motion to dismiss plaintiffs’ challenge to a settlement on a drug treating epilepsy and bipolar disorder. In doing so, the Lamictal court used the five factors that the Actavis Court had employed to justify more aggressive antitrust scrutiny to instead excuse its decision to employ less vigorous scrutiny. Just as concerning, it substituted its own armchair analysis for the burdens of proof articulated in Actavis.
In the second case, In re Loestrin 24 FE Antitrust Litigation, the Rhode Island District Court relied on Lamictal’s flawed framework to grant motions to dismiss plaintiffs’ challenge to a settlement delaying generic entry of an oral contraceptive.5 The court agonized over the “close call” presented by the case while failing to recognize that it was its own following of the Lamictal court’s framework that led it into briar patches of confusion, uncomfortable policy conclusions, neglect of pleading standards, and encouragement of conduct that it knew would “evade [antitrust] scrutiny.”
If the Lamictal and Loestrin decisions are upheld and adopted by other courts, plaintiffs will face insurmountable hurdles, rendering the landmark Actavis decision nothing more than a dead letter. This Essay shows that the Lamictal and Loestrin courts erred in (1) applying a framework never anticipated in Actavis; (2) ignoring crucial holdings from Actavis; and (3) amassing unjustified powers for themselves.
By blocking affordable generic prescription drugs, exclusion-payment settlements cost consumers billions of dollars and have profound consequences for public health. But if the trend unleashed by the Lamictal and Loestrin cases is not quickly reversed, courts will be relegated to the role of traffic cops waving anticompetitive settlements through flashing green lights of judicial “scrutiny.”
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