Create Antitrust Problems

The Third Circuit Court of Appeals, In re Lipitor Antitrust Litig. 868 F.3d 231. (3d Cir. 2017) & 855 F.3d 126 (3d Cir. 2017) and 855 F.3d 126 (3d Cir.) ruling that the district court erred by dismissing claims for class action. This case was about Hatch-Waxman Act claims that consumers made under the Hatch Act, which states that companies with patents on Lipitor or Effexor XR engaged monopolistic procurement and enforcement proceedings against generic producers to stop competition. Because the claims are based on antitrust law and not patent law, they were ruled on by the Third Circuit Court of Appeals instead of being decided in Federal Circuit Court of Appeals.

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The Third Circuit ruled that the allegations of fraud in the acquisition and enforcement of patents didn’t come from patent law. The court denied requests to transfer the Hatch-Waxman case to the Federal Circuit. 855 F.3d 126 133, 343, (3d Cir. 2017. The aim of the framework it noted, was to encourage generic drug competition, ensure public safety, and provide incentives for the manufacture of generic medicines. Congress wanted to help encourage manufacturers of generic drugs to challenge weak patents by enacting the Drug Price Competition and Patent Term Restoration Act (known as the Hatch-Waxman Act).

Name-brand drug manufacturers are required to submit an New Drug Application (under the Act) to FDA. If the application is approved and a generic company is approved, it can file an Abbreviated New Drug Application with the certification that it is not in violation of the patents of the original manufacturer. Generics with the identical active ingredients as the brand name drug and are biologically identical to the drug can be filed without the same rigorous testing.

There is no patent violation even if the patent is expired or is invalid, or will for some other reason not be infringed by a generic. The FDA does not allow generics for a minimum of 30 months if the manufacturer of the name brand drug disagrees. The Abbreviated New Drug Application is submitted by the first generic manufacturer. This permits the first manufacturer of generics to produce the generic drug for six months prior to when any other manufacturers can market their own version.

But, this system could lead to collaboration between name-brand and generic manufacturers. F.T.C. v. Actavis, Inc. In F.T.C. v. Actavis, Inc., 133 S. Ct. 2223 2227, 186L. Ed. 2d 343 (2013). The Supreme Court ruled that payments made by patentees to infringers via “reverse settlement agreements” are subject to antitrust lawsuits. In a reverse-payment settlement agreement that the brand name manufacturer does not pay the generic company to manufacture the drug, which allows the name brand to continue to charge the highest cost for the drug. Since the generic manufacturer gets money in exchange for not competing with the name brand, it creates an antitrust conspiracy.

In the Third Circuit cases, this is what the consumers said was the case: the producers of Lipitor and Effexor XR had paid the generic manufacturers not to rival the brand name products. The Third Circuit ruled that antitrust claims arose under law of competition and not under patent law. Even though patent law would be taken into consideration, the case did not require transferring to a different court, thereby adding more delay. The court of appeals decided that the evidence didn’t show federal diversity jurisdiction. It also ordered the trial court to decide whether federal courts have jurisdiction. On remand, the trial court dismissed the complaints in the cases against both the Lipitor manufacturer as well as the Effexor XR manufacturer.

The Third Circuit reversed again the district court, and decided that the Lipitor plaintiffs had made a claim that companies were guilty of committing fraud by executing illegal reverse settlement agreements. 868 F.3d 231, 253 258 (3d Cir. 2017). The alleged unlawful reverse payment settlement agreement came about when the manufacturer of Lipitor is able to pay off the generic manufacturer, who does not have an adequate claim for damages. Antitrust law is violated when the patent holder and the generic manufacturer are in agreement to block the competition. The issue is now resolved.

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