Pay to delay?

Ranbaxy and AstraZeneca win jury victory in test of what antitrust limits may be placed on reverse payment deals

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BOSTON—A Massachusetts jury has found that an agreement between AstraZeneca, the global biopharmaceutical giant, and Ranbaxy Laboratories Ltd., a generics drugmaker, to delay the introduction of a generic version of AstraZeneca’s heartburn drug Nexium was not anticompetitive.
The verdict, reached Dec. 5 in federal court in Boston, is the first time a jury has decided such a case since the U.S. Supreme Court ruled in June 2013 that “so-called pay-for-delay settlements may run afoul of antitrust laws,” according to the New York Times—in other words, whether the Hatch-Waxman Act settlements could be challenged under federal antitrust law. The Drug Price Competition and Patent Term Restoration Act of 1984, usually referred to as the Hatch-Waxman Act, was designed to promote generics while leaving intact a financial incentive for research and development. It allows generics to win U.S. Food and Drug Administration (FDA) marketing approval by submitting bioequivalence studies.
The case that had reached the Supreme Court was filed by the U.S. Federal Trade Commission, which maintains that “reverse payments” cost drug buyers as much as $3.5 billion a year—the agency noted that in 2012 alone, 40 such reverse payment deals were struck. The pharma industry not only disputes the $3.5-billion number and argues deals like these are legal, but also largely maintains that such deals allow lower-cost generic drugs to reach consumers faster than if patent litigation cases are filed and drag on.
Plaintiffs, who included drug wholesalers and insurers, claimed that generic Nexium could have been on the market as long as six years ago. They also argued that Ranbaxy could have begun selling a generic version “at risk,” resulting in a cheaper version being available earlier.
Venable LLP, led by partner J. Douglas Baldridge, represented Ranbaxy in the suit in Federal District Court in Boston. Ranbaxy and AstraZeneca challenged a 2008 settlement of a patent lawsuit that stalled sales of a cheaper version of Nexium in the United States until AstraZeneca’s patents expired last May. The legal firm, which includes 600 attorneys in six offices and specializes in antitrust litigation, described the suit as “the first test of what limits may be placed on reverse payment deals among drugmakers to protect steady streams of revenue on popular drugs.”
The Venable team for the six-week trial consisted of partners J. Douglas Baldridge, Lisa Jose Fales and Danielle R. Foley, associates Vincent Verrocchio, Paul Feinstein, Sarah Choi and Molly Cusson with Marta Markowska and Jeanne Mooney. Led by Douglas Baldridge, the Venable trial team emphasized the fact that even though the date for generic entry had come and gone, no generic received even tentative approval from the FDA for another similar drug.
Baldridge pointed to the fact that the jury clearly agreed with the defendants’ argument dismissing the idea that “but for so-called ‘illegal’ payments by the defendants, the plaintiffs could have entered the market at an earlier date. Clearly that did not occur,” Baldridge said. “The system worked. The jury understood the facts of the case and were not swayed by wishful thinking on the part of the plaintiffs,” he said in his closing arguments. “The drug buyer groups were living in a fantasy world during the trial. No company could have produced generic Nexium sooner because none of the generics makers had FDA approval.”
Ranbaxy had said in an earlier court filing that, “The buyers failed to show they were actually harmed by the deal between the companies,” relying instead upon “strained opinions of experts who each proffer a version of what could have or would have happened in a hypothetical world that has no connection to the evidence.”
Fales, another of the Venable team, believes that the case was successful for Ranbaxy, because “The legal system worked, and the jury got it. The jurors understood that there was a lack of causation in the plaintiff’s case. We also had a cohesive legal team that helped the jurors to separate the wheat from the chaff.”
Fales explained that given the length and complexity of the case, the fact that it was essentially deliberated in a day by the jurors proves that reality trumped the hypothetical case posited by the plaintiffs. “The jurors understood the complicated legal and technical issues of how the Hatch-Waxman legislation works, how business works and how drug companies operate,” she concluded.

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