PHILADELPHIA – The U.S. Court of Appeals for the Third Circuit has reversed a judicial order that forced two pharmaceutical companies to pay $448 million in penalties, for attempting to keep generic-brand versions of their testosterone replacement therapy drug AndroGel off the market, and for creating a monopoly.
Third Circuit judges Thomas M. Hardiman, David J. Porter and Peter J. Phipps issued the ruling on Sept. 30, which threw out a 2018 federal court order from U.S. District Court for the Eastern District of Pennsylvania Judge Harvey Bartle III.
Hardiman authored the Court’s opinion in this case.
The matter began in 2014, when the Federal Trade Commission brought suit against AbbVie and Besins Healthcare for settlements that both companies made with Teva Pharmaceuticals and Perrigo Company, in trying to delay those other companies from bringing generic versions of AndroGel to market.
This is a tactic known in the pharmaceutical industry as “pay-for-delay.”
The FTC argued that AbbVie and Besins filed ill-supported patent infringement lawsuits to orchestrate the settlements, one tenet of which was that AbbVie and Besins would supply Teva and Perrigo with generic version of another drug named TriCor.
The U.S. District Court for the Eastern District of Pennsylvania and Bartle dismissed the FTC’s counts on the reverse-payment theory, but found that the defendants were liable for monopolization on the sham-litigation theory.
As a part of the decision, the Court ordered the defendants to pay $448 million in profits, disregarding the FTC’s calculation that the companies pocketed about $1.2 billion through its actions. All parties filed appeals to Bartle’s ruling.
One of those appeals was brought by the FTC in January, requesting an injunction to prevent AbbVie and Besins from continuing to file sham lawsuits and stating that Bartle erred in his 2018 ruling.
In the Third Circuit ruling, Hardiman stated that the District Court did not possess the authority under federal law to force the pharmaceutical companies to hand over its profits.
“Section 13(b) [of the Federal Trade Commission Act] authorizes a court to ‘enjoin’ antitrust violations. It says nothing about disgorgement, which is a form of restitution, not injunctive relief. Thus, Section 13(b) does not explicitly empower district courts to order disgorgement,” Hardiman stated.
In contrast, the panel of Hardiman, Porter and Phipps did conclude that AbbVie and Besins were responsible for creating a monopoly in their lawsuit against Perrigo Company for its generic version of AndroGel, and resurrected the FTC’s claims over AbbVie’s lawsuit against Teva Pharmaceuticals and its own generic drug.
“The District Court erred by dismissing the FTC’s claims to the extent they relied on a reverse payment theory. The FTC plausibly alleged an anticompetitive reverse payment. It alleged AbbVie and Besins filed sham lawsuits against Teva and Perrigo in order to trigger the automatic, 30-month stay of FDA approval on its generic version of AndroGel,” Hardiman said.
AbbVie tried to argue that the deal between it and Teva Pharmaceuticals sparked competition, but the Third Circuit did not agree.
“It elevates form over substance because companies could avoid liability for anticompetitive reverse payments simply by structuring them as two separate agreements – one in which the generic company agrees to delay entry until patent expiration, and the other in which the brand-name company agrees to split monopoly profits,” Hardiman said.
“Because the FTC plausibly alleged the TriCor deal was a reverse payment, the settlement may have been ‘something more than just an agreed-upon early entry – it may have been ‘pay-for-delay’. And pay-for-delay is anticompetitive, even if the delay does not continue past patent expiration.”
U.S. Court of Appeals for the Third Circuit cases 18-2621, 18-2748, 18-2758
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com