AAI Successfully Defends California’s Pay-for-Delay Legislation in Ninth Circuit

On July 24, the Ninth Circuit sided with the Attorney General of California, AAI and fellow consumer groups in affirming a district court’s rejection of a pharmaceutical trade association’s challenge to California’s new pay-for-delay legislation, California Assembly Bill 824 (AB 824).  AAI, joined by Consumer Reports and Public Citizen, had filed an amicus brief in the Ninth Circuit countering the association’s efforts to thwart the pro-consumer legislation.

AB 824 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), which 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 argued that AB 824 would prevent procompetitive patent litigation settlements, leading to fewer generic challenges to branded pharmaceuticals, higher drug prices, and diminished public health.  AAI had filed an amicus brief in district court countering AAM’s arguments.

On New Year’s Eve, the district court denied AAM’s motion and later denied a subsequent motion for an injunction pending appeal.  On appeal to the Ninth Circuit, AAM made arguments similar to those it made below.

AAI’s brief, which was written by Hilliard & Shadowen Partner Rick Brunell, with assistance from AAI Vice President of Legal Advocacy Randy Stutz, explained 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 and the California Supreme Court’s decision in In re Cipro Cases I & II.  Among other things, the brief explained that the public interest does not support an unfettered right for litigants to reach anticompetitive settlements, why AAM’s arguments were wrong on the merits, and why similar arguments were appropriately rejected by the Supreme Court in Actavis.

In ruling for the California Attorney General, the Ninth Circuit held that, in light of the statute’s restrictions on illegal reverse payment agreements, AAM failed to demonstrate a substantial risk that AB 824 will cause any of its members to suffer an injury sufficient to confer Article III standing.