AAI Fights to Preserve Supreme Court’s Actavis Ruling in Fifth Circuit (Impax v. FTC)

AAI, Public Knowledge, and Patients for Affordable Drugs have submitted an amicus brief asking the Fifth Circuit to affirm an administrative decision of the Federal Trade Commission (FTC) barring a pay-for-delay settlement between Impax Laboratories and Endo Pharmaceuticals.

The case began when Impax, a generic drug manufacturer, sought to launch a generic version of Endo’s Opana ER, a branded opioid pain medication. Endo sued Impax alleging that Impax’s planned entry would infringe Endo’s patents on Opana ER.  Under the Hatch-Waxman Act, Impax is permitted to seek to enter the market prior to the expiration of the patent term by filing an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration (FDA), and certifying that Endo’s patents covering the brand drug are invalid or not infringed.  But by filing an infringement lawsuit, Endo obtains an automatic 30-month stay during which the FDA may not grant final approval of the ANDA and Impax may not enter the market.

Shortly after Impax received preliminary FDA approval and just before expiration of the 30-month stay, Impax and Endo settled their patent litigation with Endo agreeing to make a “reverse payment” to Impax in exchange for Impax agreeing to delay its entry into the Opana ER market.  The FTC challenged the settlement as a violation of Section 5 of the FTC Act.   After an administrative trial, an administrative law judge dismissed the FTC’s complaint.  Complaint Counsel then appealed, and in an opinion authored by Commissioner Phillips, a unanimous Commission reversed.

On appeal of the Commission decision to the Fifth Circuit, Impax concedes that it made a large and unjustified reverse payment, but it characterizes the FTC’s burden in establishing a prima facie case under FTC v. Actavis as requiring the FTC to prove that Impax’s entry was delayed longer than it would have been had the patent litigation continued.

The AAI brief explains why Impax’s argument, if accepted, would amount to a radical rewrite of the Supreme Court’s watershed ruling in Actavis.  When drug companies settle infringement claims with reverse payments, Actavis identifies the relevant antitrust harm as eliminating a “risk of competition,” without regard to the strength of the underlying patents.  By asking the court to require the FTC to show the elimination of more risk than the strength of Endo’s patents warranted, Impax effectively seeks to resurrect the “scope of the patent” test, which Actavis rejected.

The brief also explains why Impax’s claimed procompetitive justifications—that entry occurred earlier than if the patent infringement claim had been litigated and won, and that the agreement included a broad license covering future patents on Opana ER, which could not have been obtained in litigation—are non-cognizable.  Among other things, the proper benchmark is the date of entry without a payment, not the date of entry without any settlement at all.  And broad licenses covering after-acquired patents on brand drugs are routinely included in procompetitive settlements that do not include a payment for delayed entry.

The brief was written by Hilliard & Shadowen partner Rick Brunell, with assistance from AAI Vice President of Legal Advocacy Randy Stutz and AAI Research Fellow Taryn Smith.