Addressing a pay-for-delay and pharmaceutical-settlement antitrust jury trial for the first time since the 2012 Supreme Court of the United States decision in FTC v. Actavis (IP Update, Vol. 16, No. 7), the US Court of Appeals for the First Circuit affirmed the district court’s decision denying a new trial after the jury found that plaintiffs had not shown they suffered an antitrust injury that entitled them to damages. In re: Nexium (Esomeprazole) Antitrust Litigation, Case Nos. 15-2005; -2006; -2007 (1st Cir., Nov. 21, 2016) (Lynch, J).
In 2005, prior to the case at hand, AstraZeneca and Ranbaxy Pharmaceuticals reached a settlement agreement in response to a Hatch-Waxman litigation involving AstraZeneca’s prescription heartburn medication Nexium and Ranbaxy’s generic equivalent. AstraZeneca claimed that Ranbaxy’s generic infringed six of its patents, including two expiring on May 27, 2014. As part of the settlement agreement, Ranbaxy agreed to delay the launch of its generic until May 27, 2014, in return for various promises from AstraZeneca, including the agreement not to market its own authorized generic version of Nexium during Ranbaxy’s 180-day exclusivity period (called a “no-AG clause”), and others concerning manufacturing and distribution. The case involved similar settlements between AstraZeneca and two other generic manufacturers—Teva and Dr. Reddy’s—but those defendants settled before trial.
Subsequently, a collection of pharmaceutical retail outlets and certified classes of direct purchasers and end payors sued AstraZeneca and Ranbaxy claiming that their settlement “constituted a large and unjustified payment” that was a pay-for-delay settlement with anticompetitive effects. Pay-for-delay or “reverse payment” settlements refer to a situation where a brand name manufacturer and patent holder pays a generic manufacturer and alleged patent infringer to settle and delay the generic’s entry into the market. In FTC v. Actavis, the Court found that these settlements can carry the “risk of significant anticompetitive effects” and are therefore subject to antitrust rule of reason analysis. More recently, in In re: Loestrin, the First Circuit stated that these “reverse payments” may be non-monetary and may take the form of other advantages to the generic manufacturer.
At trial, the jury found that plaintiffs proved an antitrust violation but had not shown that they suffered an antitrust injury that entitled them to damages. Plaintiffs moved for a new trial, and the district court denied the motion. On appeal, plaintiffs claimed that the district court made a number of fundamental errors, including 1) various evidentiary rulings, including the exclusion of expert witnesses; 2) erroneously granting judgment as a matter of law in the defendants’ favor on the issue of overarching conspiracy; 3) reversible error in the special verdict form and jury instructions; and 4) in summary judgment rulings, “cut[ting] down the number of causal mechanisms through which the plaintiffs could make their case to the jury.”
After a detailed explanation of the New Drug Application and Abbreviated New Drug Application process, and a comprehensive history of the underlying lawsuits and settlements and the case’s summary judgment and trial proceedings, the First Circuit found no reversible error by the district court. The First Circuit found that any errors at summary judgment were “rendered harmless” by the jury verdict and trial proceedings; that the verdict form, although “perhaps . . . inartfully phrased,” was balanced by thorough jury instructions; and that the plaintiffs’ failure to preserve their own objections and decisions to limit testimony or forego certain arguments were strategic choices by plaintiffs and not Court error. The Court concluded that the reason for the verdict was simply a “fail[ure] to convince the jury” of antitrust injury in addition to the antitrust violation.