AAI Calls for Substance Over Form in Evaluating “Pay-for-Delay” Deals After Actavis (In re Wellbutrin XL Antitrust Litig., Nos. 2:08-cv-2431, 2433)

The AAI and Consumers Union took the rare step of submitting a trial court amicus brief in the Eastern District of Pennsylvania to address a critical question left open after the Supreme Court’s landmark pay-for-delay decision in FTC v. Actavis: the meaning of the word “pay.” After the court in In re Wellbutrin XL Antitrust Litigation called for briefing on the applicability of Actavis to an arrangement in which a generic drug manufacturer agrees to delay entry in exchange for a promise by the brand not to launch an “authorized generic” version of the drug, the AAI and Consumers Union argued that the anticompetitive effects do not change, and Actavis’ requirement of antitrust scrutiny should not change, merely because payment takes the form of a non-competition pledge rather than cash. Just like the cash payments for delay in Actavis, a brand’s promise to forego an authorized generic, which can cut the generic’s profits by 50%, conveys substantial economic value. Amici argued that if drug companies can evade the logic of Actavis simply by artfully structuring settlements that are indistinguishable in economic substance from cash payments for delay, the Supreme Court’s ruling will be reduced to a dead letter.

The brief was written by AAI Advisory Board Members Michael Carrier and Steve Shadowen, with assistance from AAI Advisory Board Member and Consumers Union Senior Policy Counsel George Slover, and AAI Senior Counsel Randy Stutz.

Professor Carrier also co-authored the AAI’s amicus brief in Actavis (originally captioned FTC v. Watson Pharmaceuticals).