Antitrust & Life Sciences Year in Review: 2022

It has been an action-packed year at the intersection of antitrust and life sciences. As 2022 draws to a close, we look back at several major court decisions and trial verdicts that made headlines in this important area over the past 12 months:

• The Seventh Circuit’s decision in In re Humira Antitrust Litigation, which held that assembling a large patent portfolio—a so-called “patent thicket”—is not an antitrust violation, a significant win for innovator and generic life sciences companies alike.
• Endo’s trial victory in In re Opana ER Antitrust Litigation, a long-running “reverse-payment” settlement case, which highlights the disagreement and uncertainty that continue to surround FTC v. Actavis.
• The dismissal of antitrust claims asserted by Regeneron against Novartis in litigation relating to “anti-VEGFs”—treatments for diseases of the eye—reflecting the perils in pleading implausibly narrow pharmaceutical markets.
• A complete defense jury verdict for C. R. Bard over AngioDynamics’ allegation that C. R. Bard’s integrated “peripherally inserted central catheter” system constituted an anticompetitive “tying” arrangement.
• A federal court’s partial revival of A.B. 824, a California statute that provides for enhanced scrutiny of “reverse-payment” settlements, which pharmaceutical manufacturers looking to settle patent litigation should be particularly cognizant of when any settlement touches California.

O’Melveny played a pivotal role in three of these developments: we helped secure the dismissal of antitrust claims in Humira, the first reverse-payment settlement case involving biosimilars; we led Novartis to victory against Regeneron; and we represented C. R. Bard in defeating AngioDynamics’ “tying” claims at trial.

To these and other matters, we bring a wealth of antitrust experience in matters involving pharmaceuticals and life sciences, medical devices, and the healthcare industry. Companies have consistently relied on us to provide top-shelf advocacy and unmatched client service—whether called upon to handle a government investigation, fend off nationwide class-action litigation, take a “bet-the-company” case to trial, or advise on a business deal.

Seventh Circuit Rejects Novel Theories That Aggregation of “Patent Thickets” and Multi-Jurisdictional Patent Settlements Violate the Antitrust Laws

Humira (adalimumab), a biologic that treats rheumatoid arthritis, plaque psoriasis, Crohn’s disease, and several other diseases, is the world’s best-selling drug. It is also one of the most well-protected; Humira’s manufacturer, AbbVie, owns over 100 patents covering the product. Is that an antitrust problem? The Seventh Circuit answered that question with a resounding no in In re Humira (Adalimumab) Antitrust Litigation.

In 2019, purchasers of Humira brought suit in the Northern District of Illinois against AbbVie and several other pharmaceutical companies that sought FDA approval to sell biosimilar alternatives to Humira. The plaintiffs alleged that by aggregating a large number of patents, which would-be biosimilar competitors would have to overcome to get to market, AbbVie had engaged in monopolization in violation of Sherman Act, Section 2. They further alleged that AbbVie and the biosimilar defendants—Samsung Bioepis (which O’Melveny represented at the district court), Amgen, Sandoz, and Fresenius—had violated Section 1 of the Sherman Act by settling patent litigation over the Humira patent portfolio. In particular, the complaints asserted that AbbVie had offered the biosimilar makers licenses to enter the European market as an inducement to delay entering the more-lucrative U.S. market until years later.

In June 2020, the district court granted the defendants’ motion to dismiss these complaints. As to the “patent thicket” claims, the court ruled that in the absence of allegations that AbbVie had obtained its patents through fraud or that its patent enforcement efforts were objectively baseless (i.e., “sham”), AbbVie was entitled to seek patent protection for Humira and enforce the resulting “patent thicket” against would-be biosimilar competitors. The court also rejected the reverse-payment (or “pay-for-delay”) claims, holding the law permits the defendants to settle patent claims on terms that allowed for different entry dates in different jurisdictions, with both entry dates preceding the expiration of relevant patents; and that, in any event, the plaintiffs had not plausibly alleged that biosimilars would have entered the U.S. market any earlier in the absence of the settlements. The plaintiffs appealed their defeat.

In August 2022, the Seventh Circuit sided with the defendants. In a unanimous opinion by Judge Easterbrook, the court held there was nothing wrong with AbbVie “having lots of patents.” Short of obtaining patents through fraud or engaging in “sham” petitioning—neither of which was at issue—there is no antitrust problem with amassing and enforcing a large patent portfolio. The First Amendment and the related “Noerr-Pennington doctrine,” the Seventh Circuit explained, deem AbbVie’s conduct “protected activity.”

The court likewise affirmed dismissal of the reverse-payment claims, finding that the plaintiffs had not alleged any “reverse payment.” Rather, “we have different legal systems, with different patent expiration dates, but fundamentally similar structures of settlement”: in Europe and the United States, where AbbVie had differing patent portfolios, AbbVie licensed the biosimilar defendants to launch their products on dates certain in return for negotiated royalties. As “traditional resolutions of patent litigation,” the court held, these settlements could not be challenged as anticompetitive.

The Seventh Circuit’s decision is a significant win for innovator and generic life sciences companies alike. For one, In re Humira affirms that applying for, receiving, and enforcing a large number of patents does not create antitrust liability—even if it serves to exclude would-be competitors—so long as fraud and “sham” petitioning are absent. In addition, the decision places an important limitation on the reach of FTC v. Actavis, the Supreme Court precedent that permits antitrust claims against “reverse-payment” settlements. Because the extent of an innovator company’s patent protection may vary across countries, it may make sense as part of a cross-jurisdictional settlement with a generic or biosimilar firm to agree to licensed entry dates that differ by jurisdiction. So long as the entry dates do not extend beyond patent expiration and any payment is flowing from the generic/biosimilar firm to the innovator, the Seventh Circuit holds, these settlements cannot be challenged under Actavis. This affords life sciences companies much-needed flexibility in resolving patent disputes that cross borders.

Jury Win for Endo Pharmaceuticals in Opana ER Class Action Challenging Alleged “Reverse-Payment” Patent Settlement

In 2010, Endo Pharmaceuticals and Impax Laboratories settled a patent case involving Impax’s generic version of Endo’s Opana ER, a long-acting pain medication. As part of the settlement, Impax received a license to begin selling generic Opana ER in January 2013. For its part, Endo agreed to (i) not sell an “authorized generic” version of Opana ER during Impax’s first 180 days on the market, and (ii) compensate Impax if the market for Opana ER deteriorated by a certain degree prior to Impax’s 2013 entry. This latter term ultimately resulted in a $100-million payment to Impax. In July 2022, a Chicago jury was asked to decide whether this arrangement constituted an anticompetitive “pay-for-delay” settlement.

At trial, the plaintiffs argued that Endo “made out like a bandit” by paying Impax to sit on the sidelines, and that the deal was anticompetitive because Impax could otherwise have launched its generic product as early as 2011. But as Endo pointed out, Impax’s license was unique: it covered not only the patents-in-suit, but also any future Opana ER patents that Endo might obtain. Other generic companies had settled with Endo, but like Impax, none of them negotiated for a license to future patents. When Endo obtained more patents, it successfully enforced them against the other generics, securing permanent injunctions that extend into late 2020. But because Impax’s settlement bestowed a broad license, Impax has been selling generic Opana ER unimpeded since January 2013. According to Endo, the parties’ settlement accelerated generic competition by ensuring that Impax could sell generic Opana ER without having to combat additional patent suits.

Ultimately, the jury sided with Endo. The jury found that Endo possessed market power and had made a reverse payment to Impax but determined that the settlement was not anticompetitive. The jury was persuaded by Endo’s showing that, but for the settlement, Impax would have been excluded from selling generic Opana ER.

This notable defense verdict came roughly one year after the Fifth Circuit upheld a Federal Trade Commission (FTC) order finding that the same settlement was anticompetitive. That decision stemmed from an FTC enforcement action, which Impax took to trial before an administrative law judge in 2017. Though the trial judge ruled that the settlement was procompetitive and lawful, the five Commissioners overseeing the agency overturned that ruling in 2019. On appeal, the Fifth Circuit sided with the Commission.

These conflicting outcomes highlight the disagreement and uncertainty that continue to surround FTC v. Actavis, the 2013 decision permitting antitrust claims against “reverse-payment” settlements. Given the potentially high stakes—class-action plaintiffs may assert nine- or ten-figure damages claims in antitrust actions challenging patent settlements—life sciences companies should consult with antitrust counsel when attempting to resolve patent disputes.

O’Melveny’s Win for Novartis Shows the Peril in Pleading Implausibly Narrow Pharmaceutical Markets

In February 2022, O’Melveny scored a sweeping win for Novartis Pharmaceuticals when Judge David Hurd of the Northern District of New York dismissed a retaliatory antitrust suit by Regeneron Pharmaceuticals. The crux of the decision was that Regeneron failed to plead a plausible “relevant market.”

The parties’ dispute began in June 2020, when Novartis filed a patent suit alleging that Regeneron’s Eylea pre-filled syringe (PFS) product infringed Novartis’s U.S. Patent No. 9,220,631. The ’631 patent claims a PFS for delivering “anti-VEGF” drugs, which treat diseases of the eye. In July 2022, Regeneron filed suit against Novartis and Vetter Pharma International, a company that fills vials and PFS products for anti-VEGF products. Regeneron alleged that Novartis had obtained the ’631 patent through fraud on the U.S. Patent & Trademark Office, in violation of Sherman Act, Section 2 (a so-called “Walker Process fraud” claim); and that Novartis and Vetter had conspired to deny Regeneron access to filling services that Regeneron needed to manufacture Eylea PFS. The goal, according to Regeneron, was to ensure that Lucentis PFS—an anti-VEGF drug that Genentech manufactures pursuant to a license from Novartis—enjoyed monopoly power in the alleged U.S. “anti-VEGF PFS” market.

Represented by O’Melveny, Novartis first successfully transferred Regeneron’s case from the Southern District of New York to the Northern District of New York, where it was consolidated with Novartis’s patent suit. Novartis then sought dismissal of Regeneron’s claims, arguing (among other things) that Regeneron’s alleged relevant market—the US market for anti-VEGF PFS products—was not plausible. As Novartis pointed out, Regeneron’s complaint acknowledged that many anti-VEGF drugs (including Eylea and Lucentis) are sold in both PFSs and vials, and that regardless of packaging, anti-VEGF drugs treat the same diseases. Novartis argued that Regeneron did not make sufficient factual allegations to establish that anti-VEGF vials and PFSs occupy entirely separate markets. And without a plausible relevant market, Regeneron could not maintain any of its antitrust claims.

The district court agreed with Novartis and dismissed Regeneron’s complaint with prejudice. Judge Hurd held that Regeneron’s alleged “PFS-only” market was not plausible because Regeneron had “failed to meaningfully explain why anti-VEGF vials are not a reasonable substitute for an anti-VEGF PFS.” Regeneron’s complaint alleged that anti-VEGF PFSs have convenience and safety benefits over anti-VEGF vials, and that manufacturing PFSs requires different equipment than that required for vials, but as Judge Hurd pointed out, those allegations did not indicate that consumers would not or could not switch between vials and PFSs in response to a change in their relative prices. Without more, Regeneron’s allegations did not plausibly establish that PFSs and vials occupied distinct market.

Regeneron has appealed to the Second Circuit, where the U.S. Department of Justice, the FTC, 15 State Attorneys General, and other groups have filed amicus briefs. The appeal invites the Second Circuit to address an issue of recurrent importance in pharmaceutical antitrust cases: what facts plaintiffs must allege to define a plausible relevant market and withstand a motion to dismiss.

O’Melveny Secures Trial Win for C. R. Bard on Section 1 Tying Claim

In October 2022, following five years of litigation and a three-week trial, O’Melveny secured a favorable verdict for C. R. Bard in a major antitrust case. AngioDynamics alleged that C. R. Bard violated the Sherman Act by unlawfully “tying” two products: its peripherally inserted central catheters (PICCs) and its tip-location system (TLS) that clinicians use to pilot the guidewire at the tip of the PICC (also called a stylet) through patients’ veins to its destination near the heart. Specifically, C. R. Bard integrated proprietary TLS stylets into its PICCs, selling the system as one product. According to AngioDynamics, C. R. Bard’s alleged refusal to sell PICCs and its TLS stylets separately prevented customers from choosing competing PICC systems, including AngioDynamics’ BioFlo PICC.

At trial, AngioDynamics argued to the jury that hospitals’ choice was diminished as a result of Bard’s conduct. In rebuttal, C. R. Bard argued that AngioDynamics’ failure to effectively compete stemmed from its own business decisions rather than from C. R. Bard’s alleged conduct. C. R. Bard also put on evidence that its integrated system provided medical and consumer benefits, such as reducing the risk of infection.

The jury returned a verdict for C. R. Bard, finding that AngioDynamics failed to prove the elements of its tying claim. This victory underscores that innovative product integrations, which can produce medical, economic, and other benefits, should not be treated as unlawful “tying” arrangements under the antitrust laws.

Partial Revival of California’s Reverse-Payment Settlement Statute (A.B. 824)

In 2019, the California legislature passed A.B. 824, a statute that targets “reverse-payment” settlements between brand-name and generic drug manufacturers. Whereas the United States Supreme Court held in FTC v. Actavis that these settlements are to be evaluated under the fact-intensive and relatively deferential “rule of reason,” A.B. 824 provides for more exacting scrutiny under California law. In particular, the statute:

• creates a presumption that patent settlements in which the generic or biosimilar firm “receives anything of value” and agrees to defer its market entry “for any period of time” are anticompetitive, with only limited exceptions;
• limits the procompetitive justifications that pharmaceutical companies may offer in defense of settlements;
• provides that the relevant market is presumptively limited to the brand-name product and its corresponding generics or biosimilars; and
• permits the State of California to levy steep civil penalties for violations.

Shortly after A.B. 824 was enacted, a pharmaceutical association brought suit to invalidate the statute as unconstitutional. It argued that A.B. 824 violates the dormant commerce clause because it unduly burdens interstate commerce and amounts to an extraterritorial application of state law. In December 2021, a district court entered a preliminary injunction, preventing California from enforcing A.B. 824.

In January 2022, the State of California petitioned the court to revise the preliminary injunction to allow California to enforce A.B. 824 in two circumstances: (1) against settlement agreements made in connection with in-state pharmaceutical sales, and (2) against settlement agreements negotiated, completed, or entered into within California’s borders. The court denied the State’s request as to agreements made in connection with in-state sales, finding that to allow such enforcement would require the court to rewrite state law. But the court granted the State’s request as to settlement agreements negotiated, completed, or entered into within California’s borders, finding that this application of A.B. 824 constitutionally regulates conduct occurring wholly within California’s borders.

Pharmaceutical manufacturers looking to settle patent litigation should be cognizant of A.B. 824’s partial revival. If a settlement touches California—for example, if the underlying patent litigation is pending in a California federal court, if settlements negotiations are conducted in California, if the settlement is signed in California, or if one or more of the settling parties is based in California—the settlement could potentially come within A.B. 824’s reach. It will be more difficult for settling companies to defend against private litigation or government enforcement actions under A.B. 824, and the availability of civil penalties gives California antitrust authorities a potent weapon that their federal counterparts lack. These risks make it all the more important that life sciences firms consult with antitrust counsel when attempting to resolve patent litigation.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ben Bradshaw, an O’Melveny partner licensed to practice law in California and Washington, DC, Ian Simmons, an O’Melveny partner licensed to practice law in Pennsylvania and Washington, DC, Andrew Frackman, an O’Melveny partner licensed to practice law in New Jersey and New York, Stephen McIntyre, an O’Melveny partner licensed to practice law in California, Lisa B. Pensabene, an O’Melveny partner licensed to practice law in Delaware and New York, Brett J. Williamson, an O’Melveny partner licensed to practice law in California, New York, and Washington, DC, Brian P. Quinn, an O’Melveny counsel licensed to practice law in Virginia and Washington, DC, Ashish Sudhakaran, an O’Melveny counsel licensed to practice law in California, Carolyn S. Wall, an O’Melveny counsel licensed to practice law in New Jersey and New York, George Bashour, an O’Melveny associate licensed to practice law in New York and Washington, DC, Emme Tyler, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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