Where two pharmaceutical companies sued for alleging conspiring to delay generic competition by artificially prolonging a patent argued they had a procompetitive reason for entering into a settlement agreement that included a reverse payment, the court clarified their burden at trial.
In this multidistrict litigation, plaintiffs allege that defendants Merck and Glenmark conspired to delay generic competition for the branded cholesterol medication protection Zetia by artificially prolonging its patent. Plaintiffs have filed a motion in limine that seeks to exclude defendants’ claimed procompetitive justifications that, plaintiffs assert, are contrary to law.
The rule of reason, applied to reverse payment cases by the Supreme Court in Federal Trade Commission v. Actavis, 570 U.S. 136 (2013), is a three-step, burden-shifting framework for analyzing claims under the Sherman Act. In a reverse payment case, at step one of the analysis, antitrust plaintiffs have the burden to show that a payment was made from the patentholder to the patent challenger to avoid the risk of competition.
If the plaintiffs satisfy their step one burden, the analysis turns to step two, where the antitrust defendants have the burden to show a procompetitive justification for the challenged restraint on competition. Upon such a showing, the analysis moves to step three, where the plaintiffs have the burden to rebut the justifications offered, and prove the restraint on competition was anticompetitive and violated the Sherman Act.
At the heart of the dispute in this motion is a fundamental disagreement about step two of the rule of reason analysis. Purchasers believe that defendants’ burden at step two is to produce a procompetitive justification for the reverse payment specifically as opposed to the settlement agreement as a whole. Purchasers claim that the justifications defendants have offered thus far only relate to the settlement agreement as a whole and are not related to — or sufficient justification for — the reverse payment itself.
Defendants have a different view. They read Actavis to hold that the “challenged restraint” for which justification must be shown is the entire settlement agreement. Having reviewed the cases cited by the parties and considered the arguments on both sides, I agree with defendants’ reading of Actavis and conclude that, in this case, the “challenged restraint” cannot be separated from the settlement agreement as a whole.
As such, defendants are entitled to argue that the entire settlement agreement was procompetitive, and are entitled to rely on procompetitive justifications for the agreement, including the negotiated early entry date in December 2016, and the advantages of certainty that come from settlements generally. Purchasers may certainly argue that the procompetitive justifications offered are not sufficient because they only bear on the settlement agreement as a whole, and not the no-AG provision specifically. But these arguments are presented at step three, when purchasers must establish that the challenged restraint — as found by the jury — was ultimately anticompetitive.
Plaintiffs’ motion in limine denied.
In re: Zetia (Ezetimibe) Antitrust Litigation, Case No. 2:18-md-2836, April 11, 2023. EDVA at Norfolk (Miller). VLW 023-3-201. 15 pp.