Home > Journals > St. John's Law Review > Vol. 98 > No. 5
Document Type
Article
Abstract
In 2013, the Supreme Court issued one of the most important antitrust rulings in the past generation. In FTC v. Actavis, the Court held that agreements by which brand drug firms pay generics to delay entering the market could violate antitrust law.
Some have criticized the Court for not providing sufficient guidance on the type of analysis courts should apply to settlements involving “reverse payments” (in which patentees pay infringers to delay entry in contrast to more typical agreements by which alleged infringers pay patentees to enter). For example, in his dissent in Actavis, Chief Justice Roberts wrote: “Good luck to the district courts” that must apply “antitrust law’s unruly rule of reason.”
While discussion of uncertainty regarding the appropriate antitrust analysis has focused on Actavis, there has been no attention paid to the fact that almost every post-Actavis antitrust case that has survived a motion to dismiss or summary judgment has settled.
Highlighting the dangers of settlements has a long-established pedigree in the civic republican tradition. And litigation through an ultimate verdict serves instrumental purposes relating to the fact-finding function and public good of legal precedent. These purposes are threatened by settlement. And the concerns are exacerbated by repeat players who settle cases when they expect unfavorable rule outcomes and litigate when they believe they can obtain favorable rules.
We apply these theories to the post-Actavis caselaw. The Article categorizes three types of issues that have not been fully developed. First is a “large and unjustified payment.” Because of the recurrence of fact patterns that are never definitively resolved, this presents the most significant loss for the development of the caselaw. Second, causation issues reflect a modestly more legal—as opposed to factual—assessment, and thus slightly less harm. Third, market power reflects an even more modest loss because of its wholly fact-dependent nature.
We also undertake the first empirical survey of every settled reverse payment case after Actavis. We find that the vast majority of these cases settled, most frequently after denials of summary judgment. We also find that: the pattern applies in pharmaceutical antitrust cases more broadly; the most frequently litigated issues are large and unjustified payment (at the motion to dismiss stage) and causation (at summary judgment); the Northern District of California has overseen the most cases; the most frequent defendants are Allergan, Teva, Endo, and Lupin; and the most frequent plaintiffs are Rochester Drug, Walgreens, Rite Aid, and CVS.
It is not hard to see why plaintiffs and defendants settle antitrust cases. Plaintiffs obtain guaranteed payment while defendants avoid adverse judgments. For the development of the caselaw, however, something is missing. This Article shows exactly what has been lost because of settlement.