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First Circuit Revives Loestrin 24 Fe Antrust Case, Ruling that "Pay for Delay" Does Not Require Money

In a major development in the “pay for delay” line of antitrust cases, the First Circuit Monday returned In re Loestrin 24 Fe Antitrust Litigation, 14-2071 (1st Cir. Feb. 22, 2016), to the district court in Rhode Island, after holding that collusion between a brand-name pharmaceutical manufacturer and a generic manufacturer to keep the generic off the market need not involve an exchange of cash.
The case began after generic drug manufacturers Lupin Pharmaceuticals, Inc, and Watson Pharmaceuticals, Inc. asserted that Warner-Chilcott PLC (now part of Actavis PLC) had no legal right to a patent for its Loestrin 24 Fe contraceptive. Instead of fighting their challenges, Warner-Chilcott got the generics to agree to delay offering their low-cost versions of the Loestrin 24 Fe contraceptive in exchange for lucrative side deals.
The catch was that these side deals did not involve any cash. In FTC v. Actavis, 133 S.Ct. 2223 (2013), the Supreme Court ruled that these types of “reverse payments,” in which a patent plaintiff pays off a supposed infringer, can amount to antitrust violations. The question was whether this only applied when the payment was in pure cash or if it is of something else of value. The Actavis Court said that it would leave these kinds of questions to the lower courts to decide. Id. at 2238.
The U.S. District Court of Rhode Island held that Actavis only applied to cash payments and dismissed the consolidated cases in 2014 at the motion to dismiss stage. In re Loestrin Antitrust Litigation, 45 F. Supp. 3D 180 (D.R.I. 2014).
However, in an opinion written by First Circuit Judge Juan R. Torruella, the First Circuit ruled that payments can involve side deals that are of value. Judge Torruella pointed that in Actavis itself the Supreme Court had noted that the brand manufacturer had also provided side deals to the generics.
He also noted that the Third Circuit, along with district courts in the First, Second, Third and Ninth Circuits, had agreed that payments could involve more than just cash.
The ruling will likely subject the settlement of any patent litigation between a brand pharmaceutical manufacturer and a generic that involves the exchange of something of value for an agreement to delay marketing their drug to a degree of scrutiny for possible antitrust violations.
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