AAI Defends California’s Pay-for-Delay Legislation in Federal Court (AAM v. Becerra)

AAI has submitted an amicus brief in the Eastern District of California opposing a motion by a generic pharmaceutical association seeking to thwart pro-consumer pay-for-delay legislation.

California Assembly Bill 824 (AB 824), signed into law by Governor Gavin Newsom in October 2019 and scheduled to take effect in January 2020, creates a framework for California courts to treat pay-for-delay agreements as presumptively unlawful under the Cartwright Act.  AAI has long advocated for a similar approach under both state and federal law in numerous amicus filings in courts throughout the United States.

In November, the Association for Accessible Medicines (AAM), a trade association that represents the interests of generic pharmaceutical manufacturers, filed a motion for a preliminary injunction against California Attorney General Xavier Becerra, seeking to bar the state from implementing or enforcing AB 824.  Among other things, AAM argues that AB 824 will prevent procompetitive patent litigation settlements, leading to fewer generic challenges to branded pharmaceuticals, higher drug prices, and diminished public health.

AAI’s brief counters by explaining the severity of the harm caused by payments to exclude generic competition, and why AB 824 is an appropriate and beneficial outgrowth of the logic underlying the Supreme Court’s watershed decision in FTC v. Actavis.  AAI’s brief explains why payments to exclude generic entry are simply a form of market division, which has long been condemned by antitrust law.  And the fact that such payments may be situated in settlement agreements that end patent litigation is not a defense in and of itself.

AAI’s brief also explains that exclusion payments are not necessary to achieve patent settlements that are in the public interest.  Indeed, generic pharmaceutical manufacturers made the same argument about preventing settlements in the Actavis case itself.  And after the Supreme Court rejected the argument and subjected such payments to antitrust liability, empirical data shows the total number of patent settlements has increased.  And most telling, the number and percentage of settlements without anticompetitive exclusion payments have increased. Brands and manufacturers have instead managed to settle patent litigation on procompetitive terms, without injuring competition and consumers.

AAI thanks the law firm of Lieff Cabraser Heimann & Bernstein, LLP, and specifically attorneys Eric Fastiff and Adam Gitlin, who served as AAI’s local counsel and assisted with all aspects of the filing.