ATLANTA (CN) - Drugmakers cannot dismiss antitrust claims stemming from their multimillion-dollar settlements to eliminate competing generic drugs, a federal judge ruled.
In the 1990s, Solvay Pharmaceuticals got an exclusive license to sell AndroGel, a patented testosterone-replacement gel originally developed by Besins Healthcare. Before Solvay's patent was issued in 2003, Watson Pharmaceuticals (now Actavis) and Paddock Laboratories tried to copy AndroGel "as close as humanly possible" with generic versions, according to court records. Paddock reached an agreement with Par Pharmaceuticals to share potential patent-litigation costs, as well as profits from sales of generic AndroGel. Watson and Par/Paddock filed generic drug applications with the Food and Drug Administration, asserting that Solvay's patent was invalid, or that it would not be infringed by their generics.
Solvay then sued Watson and Par/Paddock in August 2003 for patent infringement, automatically preventing the generics from entering the market for 30 months.
After two years of discovery and pretrial proceedings, the parties settled the case before the court could rule on the merits. Solvay dismissed the infringement action and agreed to share profits with the generic drugmakers in exchange for their work promoting AndroGel to physicians. Solvay estimated it would pay Watson between $15 million and $30 million a year and Par about $6 million a year to promote AndroGel. Paddock was also estimated to receive $2 million a year for serving as a backup supplier of AndroGel.
The generic drugmakers agreed to keep their generics off the market until August 2015 or until another company launched generic AndroGel.
The settlement agreements prompted an investigation by the Federal Trade Commission, which claimed that the "reverse payment settlements" between the drugmakers aimed to stifle competition.
The FTC, joined by private parties, sued Solvay, Watson and Par/Paddock in 2009. After all the actions were consolidated, a federal judge in Atlanta concluded that the settlements were immune from antitrust scrutiny.
The 11th Circuit affirmed the decision, but the U.S. Supreme Court reversed last year, ruling that reverse settlements can sometimes violate antitrust laws. The court remanded the lawsuit back to Atlanta for an antitrust analysis.
Solvay and Par/Paddock once again asked the court to dismiss the FTC's second amended complaint, arguing that the First Amendment protected their settlement because it was part of a consent judgment the court had signed.
Par/Paddock also invoked the Noerr-Pennington doctrine, which provides that "efforts to restrain or monopolize trade by petitioning government officials are protected from antitrust liability."
The immunity doctrine takes its name from two roughly 50-year-old U.S. Supreme Court decisions, Eastern Railroad Presidents Conference v. Noerr Motor Freight Inc. and United Mine Workers v. Pennington.
U.S. District Judge Thomas Thrash ruled last week that Par/Paddock's agreement with Solvay was not entitled to immunity because the court neither saw nor approved the companies' compensation agreements, nor did it exercise independent power to achieve the desired result.
In leaving out the profit-sharing agreements, the consent judgment did not encompass the full scope of the companies' settlement, according to the April 21 order.
"If ParPaddock and Solvay could obtain antitrust immunity merely by securing a consent judgment, they would have 'an avenue wholly impervious to antitrust scrutiny simply by seeking out a court's rubber-stamped approval,'" Thrash wrote.
Providing Par/Paddock and Solvay's consent judgment with immunity would be inconsistent with the U.S. Supreme Court's decision, and would send the wrong message to future litigants who may reach patent settlements, the judge concluded.
What's more, the consent judgment, unlike a final judgment on the merits, cannot prevent third parties from challenging Solvay's patent, according to the ruling.
Par and Paddock asked the court for an order stating that the April 21 ruling involves "a controlling question of law" and that "an immediate appeal from the order may materially advance the ultimate termination of the litigation."
A hearing is set for May 9 to address that motion.
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