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Third Circuit Holds No Sham Litigation or Unlawful Reverse Payment in Wellbutrin XL Litigation

The Third Circuit recently affirmed the grant of summary judgment to GlaxoSmithKline (“GSK”) in the nearly 10-year-old Wellbutrin XL Antitrust Litigation, which challenged the lawfulness of settlement agreements resolving patent disputes over Wellbutrin XL.  In determining that GSK had not violated the Sherman Act, the court determined that GSK’s settlement of patent infringement lawsuits did not reflect that GSK had engaged in sham litigation, or that GSK made unlawful “reverse payments” to settle that litigation.  To reach these conclusions, the court carefully picked apart years of evidence

The two classes of plaintiffs—direct purchasers of Wellbutrin XL such as pharmacies, and indirect purchasers such as consumers—alleged that GSK brought sham litigation against generic manufacturers of Wellbutrin XL.  This litigation and a related citizen petition to the FDA, appellants argued, resulted in reduced competition and delayed entry of generic Wellbutrin XL to the market, which meant higher prices for pharmacies and patients.

Appellants also claimed that the five settlement agreements GSK or Biovail entered into to resolve the litigation constituted were illegal reverse payments under FTC v. Actavis.

GSK exclusively licensed certain patents from Biovail, which related to the manufacture of an extended release Wellbutrin.  GSK’s formulation, Wellbutrin XL, received FDA approval in 2003.  After four companies sought approval to market generic versions of Wellbutrin XL, Biovail sued them for patent infringement and filed a citizen petition with the FDA requesting the imposition of conditions for approval of a generic Wellbutrin XL.  The patent litigation settled in 2007.

Sham litigation

As to the sham litigation claim, the Third Circuit emphasized the “uphill battle” litigants face in proving a claim “that a lawsuit is, by its very existence, anticompetitive.”  The court applied the sham litigation test developed by the Supreme Court in Professional Real Estate Investors v. Columbia Pictures Industries (“PRE”), which requires a plaintiff to show, first, that the lawsuit was “objectively baseless.”  Second, if indeed no “objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome,” the plaintiff must then demonstrate that the alleged sham litigator attempted to use the litigation process to interfere directly with a competitor’s business relationships.  Only by means of such a showing can the litigant overcome the presumptive immunity of the Noerr-Pennington doctrine.

The Third Circuit analyzed each of the patent infringement lawsuits and Biovail’s petition to the FDA under the PRE standard.  Carefully considering the evidence in each individual case, the court found that the settled cases were genuinely prosecuted.  In one, the court identified “the simple reason that an act of infringement plainly occurred.”  Moreover, for the cases brought by Biovail and not GSK, the court found no evidence sufficient to show a conspiracy between the two companies. 

Furthermore, the court rejected appellants’ claim that GSK engaged in “serial petitioning” against them, since GSK was a party to only two of the lawsuits at issue.  Moreover, the panel explained, GSK’s lawsuits were consistent with the intent of the Hatch-Waxman Act, which expressly authorizes a procedure by which brand drug manufacturers may challenge generic entry.

Reverse payment

Addressing appellants’ reverse payment claim, the court first considered—and rejected—the District Court’s suggestion that the “the Wellbutrin Settlement does not present the same antitrust concerns that motivated the court in Actavis,” since “the Wellbutrin Settlement required the underlying patent litigation to continue, maintaining the risk of a finding of patent invalidity or non-infringement.” 

The Third Circuit disagreed, explaining that “the settlement agreements must be evaluated under the rule of reason test.”  The panel pointed out that the settlement agreements included an alleged reverse payment—a 180-day no-AG (“authorized generic”) agreement—and there was “some support” that it was “large and unjustified,” as prohibited in Actavis.  Moreover, the settlements included an agreement by Anchen to delay launch of its generic product until after a triggering event occurred. 

Nevertheless, the court found that appellants lacked antitrust standing because they failed to raise a genuine issue as to the connection between their claimed injury and the alleged anticompetitive conduct.  That is, appellants failed to show “that the harm they say they experienced—increased drug prices for Wellbutrin XL (and its generic equivalents)—was caused by the settlement they are complaining about.” 

Appellants argued that, in the absence of the settlements, generic manufacturer Anchen would have been able to launch a generic product sooner, increasing market competition for Wellbutrin XL and lowering prices.  However, the court found that dispute over a relevant patent would have blocked the launch of the Anchen product, and Anchen had only a 20% chance of winning the patent infringement lawsuit.  Moreover, the court found, appellants had not shown sufficient evidence that Anchen might have obtained a licensing agreement with the patent holder.

The court’s studied decision therefore affirms the broad reach of Actavis, though it also highlights the difficulty of demonstrating antitrust injury in this context.  It also reiterated the challenges of successfully prosecuting a sham litigation claim, particularly in the Hatch-Waxman context.