Antitrust

• Author: Kenneth Dorsney
• Pages: 293-327

293

chapter 13

Antitrust1

I. Overview of Antitrust Issues

Antitrust issues in Abbreviated New Drug Application (ANDA) cases arise

in two main ways: (1) settlements between the patentee and the generic

that are accused of being anticompetitive; and (2) accusations that the

patentee engaged in some form of anticompetitive behavior to keep the

generic out of the market, such as sham patent litigation or patent litiga-

tion based on a fraudulently acquired patent.

The structure of the pharmaceutical industry almost invariably leads

to antitrust issues. Patent protection is strong. The patentee, prior to

generic entry, arguably has a monopoly at least as to that pharmaceutical

product, but possibly not as to a therapeutic category. The patent-based

monopoly can lead to large profits—sometimes more than a billion per

year for blockbuster drugs. When a generic product is introduced to the

market, the substitution for the patentee product is rapid, often above

90% in the first six months, and virtually guaranteed, given healthcare

and insurance policies.

Thus, the structure of the pharmaceutical industry is one of pat-

entmonopolies with large profits, with guaranteed competitors ready to

enter and drive down prices for consumers. Any action by the patentee, or

the patentee and the generic together, that delays generic entry by even a

small amount is likely to raise antitrust questions by government regula-

tors and the private antitrust bar.

This chapter contains an overview of the legal theories in ANDA anti-

trust cases (Section1), and continues with a discussion of Federal Trade

Commission (FTC) cases (Section 2), private antitrust cases brought on

1. Paula L. Blizzard, Asim M. Bhansali, and Sharif E. Jacob, Keker & Van Nest LLP.

CHAPTER 13

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behalf of direct and indirect purchasers (Section3); and concludes with a

discussion of remedies in these cases (Section4).

II. Legal Theories in ANDA Antitrust Cases

ANDA antitrust cases usually arise under three kinds of statutory claims.

The first and most common claim asserts monopolization offenses under

federal law: Section 2 of the Sherman Antitrust Act.2 These claims target

the unilateral conduct of the party seeking to maintain its monopoly,

which is typically the patentee with whose products the ANDA filer seeks

to compete.3 Second, ANDA antitrust cases can also assert conspiracy

offenses under Section 1 of the Sherman Antitrust Act.4 However, the

cases often focus less on these claims, or do not assert them at all, because

many of the claims in ANDA antitrust cases involve allegations of unilat-

eral rather than conspiratorial conduct. Finally, ANDA antitrust cases

may also assert state law causes of action and will generally do so when

federal law does not afford them a right to recovery. Long-established

federal law limits recovery to direct purchasers of goods allegedly affected

by anticompetitive conduct.5 In ANDA antitrust cases, however, many of

the parties claiming injury from the allegedly anticompetitive conduct are

indirect purchasers, including state governments, insurance companies,

and individuals who paid for or purchased drug products. Those plaintiffs,

who cannot bring a federal antitrust claim for damages, will bring claims

under individual states’ laws. These laws, which have been nicknamed

“Illinois-Brick repealer statutes” after the U.S. Supreme Court case that

precluded recovery by indirect purchasers, generally do allow recovery for

indirect purchasers and were often passed for that express purpose.

A. Monopolization (Sherman Act Section 2) Offenses

Section 2 of the Sherman Act makes it unlawful for a firm to “monopolize.”6

Monopolization has two elements: “(1) the possession of monopoly power in

the relevant market and (2) the willful acquisition or maintenance of that

power as distinguished from growth or development as a consequence of

a superior product, business acumen, or historic accident.”7 Significantly,

2. 15 U.S.C. § 2.

3. See infra Section II.A.

4. 15 U.S.C. § 1.

5. Ill. Brick Co. v. Illinois, 431 U.S. 720, 725–26 (1977); Hanover Shoe, Inc. v. United

Shoe Mach. Corp. 392 U.S. 481, 484 (1968).

6. 15 U.S.C. § 2.

7. United States v. Microsoft, 253 F.3d 34, 50 (D.C. Cir. 2001) (quoting United States

v. Grinnell Corp., 384 U.S. 563, 570–71 (1966)).

II. Legal Theories in ANDA Antitrust Cases 295

“[t]o violate Section 2, a monopolist’s conduct ‘must harm the competitive

process and thereby harm consumers. In contrast, harm to one or more

competitors will not suffice.’”8 The complexity in Section 2 cases arises in

trying to draw the line between “superior product, business acumen, or

historic accident” and anticompetitive actions apart from those that are

aimed at acquiring or maintaining monopoly power.

In the ANDA context, three kinds of claims have appeared most often:

(1) sham litigation claims charging that the patentee asserted one or more

patents against an ANDA holder without a reasonable basis; (2) Walker

Process claims arising from alleged fraud on the U.S. Patent and Trade-

mark Office (USPTO) in obtaining a patent; and (3) product-switching

claims asserting that the brand company timed its switch from one genera-

tion of a product to another in order to preclude generic competition.

1. Sham Litigation

The issue in sham litigation cases is whether the ANDA litigation’s effect

on competition was lawful or unlawful. A brand drug maker who sues an

ANDA filer on patents listed in the Food and Drug Administration’s (FDA)

Orange Book automatically blocks final approval of the ANDA for the first

thirty months that the patent lawsuit is pending.9 Thus, the filing of a

patent lawsuit against an ANDA filer necessarily has a substantial effect

on competition. The question is whether the patent holder and brand drug

maker took lawful advantage of the statutory right to a stay by filing a

lawsuit or whether it unlawfully used litigation to create or perpetuate a

monopoly.

This question, in turn, requires answering a two-part inquiry. The

first part of the inquiry is whether the brand drug company has monopoly

power. (As noted above, this inquiry is an element of every monopolization

claim.) The second part of the inquiry is whether the litigation meets the

test for a “sham claim” as established by the U.S. Supreme Court in Pro-

fessional Real Estate Investors, Inc. v. Columbia Pictures Industries Inc.10

The so-called PRE test looks at whether there was an objectively reason-

able basis for bringing suit and, if not, whether the plaintiff also had the

subjective intent to interfere with competition.

8. In re: Tricor Antitrust Litig., 432 F. Supp. 2d 408, 420 (D. Del. 2006) (quoting

Microsoft, 253 F.3d at 58).

9. Chapter 1 provides a detailed treatment of the precise details of the thirty-month

stay, including how it is triggered and how it is calculated.

10. 508 U.S. 49, 56-57 (1993).