If the uncertainty that the Supreme Court’s Actavis decision injected into the world of reverse-payment settlement litigation wasn’t enough to get your attention, then the FTC’s recent effort to obtain disgorgement from Cephalon in a reverse-payment case should do so.
Cephalon is arguing that the federal district court should dismiss the FTC’s near six-year-old complaint because the case is now moot in the wake of the generic entry. The FTC says it was Cephalon’s payments that delayed that entry. In its complaint, the FTC sought to enjoin Cephalon from enforcing its agreements with the generic companies, while also seeking unspecified “other equitable relief.”
Not so fast, says the FTC. It says that its prayer for relief and the district court’s inherent equitable power provide more than enough support for the district court to not only (1) enter an injunction preventing a recurrence of the same or similar conduct, but also (2) order equitable relief in the form of disgorgement, which is designed to force a defendant to give up the amount by which he was unjustly enriched. As a rough approximation of the potential amount involved, Cephalon’s former-CEO once said: “We were able to get six more years of patent protection. That’s $4 billion in sales that no one expected.”
If the FTC is successful in keeping its case against Cephalon alive, it won’t be the first time that disgorgement was on the table as a remedy. Back in 1998, the FTC sought disgorgement of $120 million from Mylan in a case challenging Mylan’s use of exclusive licenses to deny its competitors access to important ingredients necessary to make competing generics. That case settled for $100 million soon after the district court denied Mylan’s motion to dismiss.
Going forward, pharmaceutical manufacturers facing FTC investigations and lawsuits arising from reverse-payment settlements should take notice. With disgorgement potentially on the table, the stakes are even bigger.
Drawing on the experience of members of our intellectual property and healthcare teams, our team of antitrust lawyers has the depth and experience to handle the most significant antitrust litigation and transactions. If you have any questions regarding this matter, or would like to learn more about our healthcare antitrust capabilities, please contact Jonathan L. Lewis, email@example.com or 202.861.1557.
Members of BakerHostetler’s Antitrust and Trade Regulation team will be speaking at the upcoming Fifth Annual Great Lakes Antitrust Institute, co-sponsored by the Ohio State Bar Association, BakerHostetler, and others.
Ernest E. Vargo, chair of BakerHostetler’s Class Action Defense Team from 1998 until 2013, will participate on a panel addressing developments in class certification and antitrust cases. Edmund W. Searby, a BakerHostetler partner and a former federal prosecutor, will speak about criminal antitrust investigations and cases. Danyll W. Foix, editor of Antitrust Advocate, will be part of a panel discussing agriculture antitrust issues.
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BakerHostetler’s Antitrust and Trade Regulation team is pleased to announce the launch of a newsletter that will provide insights and commentary about notable and emerging antitrust issues.
We invite you to review the first newsletter.
Please contact us if you’d like future newsletters delivered to you by email.
Despite vocal opposition from New York Attorney General Schneiderman’s office, New York Governor Cuomo signed legislation this week authorizing Nassau Health Care Corporation (“NuHealth”) – a public healthcare provider that operates a hospital, skilled nursing facility, and several community health centers in Nassau County, New York – to “engage in arrangements, contracts, information sharing, and other collaborative activities with public or private entities and individuals including joint ventures and joint negotiations with physicians, hospitals and payors” that “may displace competition and might otherwise be considered violations of state or federal antitrust laws.” In the reported words of Eric Stock, Chief of the Antitrust Bureau for the New York Attorney General, the bill gives NuHealth a “blank check to engage in a huge swath of antitrust activities with no oversight,” which is “virtually unprecedented.”
With the trial over, post-trial briefs due November 1, and closing arguments scheduled for November 7, a lot more is at stake than whether St. Luke’s Health System (“St. Luke’s”) can keep Saltzer Medical Group (“Saltzer”) – a for-profit, physician-owned, multi-specialty group comprising approximately 44 physicians located in Nampa, Idaho. St. Luke’s closed its acquisition of Saltzer back in December 2012, but only after convincing a federal district court judge to allow the transaction to go forward despite objections from two rival hospitals and repeated requests by the FTC and Idaho AG to delay the closing so each could complete an investigation. In March, the FTC and AG joined the battle over St. Luke’s acquisition by filing a complaint seeking to unwind the transaction.
As previously reported, the FTC and Idaho AG allege that St. Luke’s acquisition of Saltzer is anticompetitive because it creates a single dominant provider of adult primary care physician services in Nampa, with a combined share of nearly 60%. The newly-combined primary care practices, the FTC and AG allege, give St. Luke’s greater bargaining leverage with healthcare plans, with higher prices for services eventually being passed on to local employers and their employees. St. Luke’s rival hospitals – but not the FTC or AG – also contend that the combination may choke their access to inpatient admissions referred by Saltzer physicians.
What is at stake in addition to whether St. Luke’s gets to keep Saltzer?
If you practice or have interest in antitrust law, you’ll want to take advantage of The Great Lakes Antitrust Institute in Columbus, Ohio on November 7-8, 2013.
The Fifth Annual Great Lakes Antitrust Institute, co-sponsored by the Ohio State Bar Association, BakerHostetler, and others, offers the unique opportunity to address antitrust topics in-depth with colleagues from the Great Lakes region and beyond.
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Two weeks into the FTC’s and Idaho AG’s antitrust trial challenging hospital system St. Luke’s Health System (“St. Luke’s”) acquisition of the Saltzer Medical Group (“Saltzer”) – a for-profit, physician-owned, multi-specialty group comprising approximately 44 physicians located in Nampa, Idaho – a lot more is at stake than just whether St. Luke’s eventually will be ordered to unwind its acquisition of Saltzer.
As reported previously, the FTC and Idaho AG allege that St. Luke’s acquisition of Saltzer is anticompetitive because it creates a single dominant provider of adult primary care physician services in Nampa, Idaho with a combined share of nearly 60%. The newly-combined primary care practices, the FTC and Idaho AG allege, give St. Luke’s greater bargaining leverage with health care plans, with higher prices for services eventually being passed on to local employers and their employees. Other local hospitals contend that the combination may choke their access to inpatient admissions referred by Saltzer physicians.
What is at stake besides whether St. Luke’s gets to keep Saltzer? According to recent comments by FTC Commissioner Joshua Wright, it will be whether the FTC launches a provider healthcare merger retrospective review – for the second time. In Commissioner Wright’s view, as reported, a loss in Idaho might well cause the FTC to turn its focus to completed hospital-physician deals to build needed experience to win such challenges.
In their answer to the government’s complaint challenging their proposed merger, US Airways and American Airlines (the “Airlines”) tout the “immense benefits to the traveling public” that the combined “US Airways and American Airlines will offer” with “more and better travel options for passengers through an improved domestic and international network, something that neither carrier could provide on its own.”
The Airlines say that models “routinely used by the airlines in their businesses demonstrate that these positive network effects” of “a unified network” would “attract millions of additional passengers to the merged airline” and that methods used by the government “conservatively demonstrate that the value of these consumer benefits would exceed $500,000,000 every year, net of any fare effects.” That is, the Airlines believe the benefit from the merger in “markets” where there is no likely competitive harm outweighs the harm in those “markets” where there might be competitive harm. To help prove their case, the Airlines are seeking access to the government’s analysis of prior airline mergers. But what is this fight really about?
The Eastern District of Texas recently held that patent infringement can constitute anticompetitive conduct for monopolization claims under Section 2 of the Sherman Act, in Retractable Technologies Inc. v. Becton Dickinson & Co., No 2:08-cv-00016 (E.D. Tex.).
After an eight-day trial, the jury for Retractable Technologies found that Becton Dickinson had attempted to monopolize the market for safety syringes, as well as committed false advertising under the Lanham Act. The jury awarded $113.5 million in damages. Last week, Retractable Technologies announced it will seek to treble the damages award.
In her first speech since becoming Director of the Federal Trade Commission’s Bureau of Competition, Deborah Feinstein highlighted five benefits arising from addressing antitrust violations through consent orders and dispelled a number of “persistent myths” about their use.
While emphasizing the FTC “employs a rigorous case-by-case approach to law enforcement decisions,” Director Feinstein explained that where “a consent order can address the harm the [FTC] alleges has occurred or is likely to occur without the need for litigation, there are enormous benefits to resolving matters through consent order.” Among the benefits she identified are: (1) quicker resolution; (2) conservation of both public and private resources; (3) more certainty of outcome; (4) flexibility in terms of crafting a remedy; and (5) providing valuable guidance to the legal and business community.