Second Circuit Affirms Dismissal of Adderall Pay-For-Delay Suit

The Second Circuit recently upheld the dismissal of a suit challenging an alleged anticompetitive refusal to deal involving a branded pharmaceutical. Plaintiffs, a class of indirect purchasers, argued that a 2006 settlement of patent infringement litigation required Shire LLC (Shire) to provide Adderall XR, which is used to treat attention deficit disorder, to authorized generic marketers Teva and Impax. Shire allegedly provided significantly lower quantities of Adderall than the settlement required. Plaintiffs contended that Shire’s delivering insufficient quantities was an antitrust violation.

The court found that “the complaint does little more than attach antitrust ‘labels and conclusions’ to what is, at most, an ordinary contract dispute.” Moreover, the Plaintiffs were drug wholesalers, not parties to the agreement. Those parties had separately settled their dispute over quantities supplied. Plaintiffs argued that the original patent settlement agreement created a “duty to deal” under Aspen Skiing. The court, however, cited several factors that distinguished this case from Aspen Skiing. In particular, there was no unilateral termination of a voluntary, and presumably profitable, prior course of dealing that would suggest sacrifice of short-term profits for long-term monopoly gain.

Plaintiffs could have argued that the Adderall patent settlement combined with the follow-on contract settlement was anticompetitive based on the Supreme Court’s recent decision in Actavis. That decision, which came out after the complaint was filed in the Adderall case but before the Second Circuit ruling, dealt with settlements of patent litigation under the Hatch-Waxman Act, which applied to Adderall. The Actavis decision established that reverse payments in those settlements could be anticompetitive and should be subjected to a rule of reason analysis. The settlement allowed for only limited entry, and plaintiffs might have argued that the patent and later contract settlement involved an anticompetitive restriction on entry that was similar to the anticompetitive “pay for delay” that the Actavis decision recognized as a possibility.

Plaintiffs, however, explicitly told the court that their appeal did not rely on the Actavis decision, even though Shire argued that it did. Moreover, plaintiffs did not allege that the Adderall patent settlement was anticompetitive. (Plaintiffs might have been influenced by the FTC’s decision not to challenge that settlement.) In fact, Plaintiffs contended that the settlement, by allowing for future entry, was procompetitive, but they alleged that the procompetitive potential of the settlement had not been attained because Shire had not abided by its terms. It was that allegation that the court found was a contract, not an antitrust issue.

EI Principal Robert D. Stoner has consulted in a number of instances about matters concerning branded vs. generic competition in pharmaceuticals.