As we’ve chronicled, in April a three-judge panel of the Second Circuit took the unusual step of urging plaintiffs challenging a Cipro pay-to-delay deal between Bayer and generic maker Barr Laboratories to seek an en banc hearing. The court explained in its ruling that it felt compelled to rule against the plaintiffs in light of Second Circuit precedent, but cited “compelling reasons” for the full court to review the Cipro case and possibly change the law. The panel of Judges Jon Newman, Rosemary Pooler, and Barrington Parker questioned the precedent set by a 2005 Second Circuit decision in which it held that pay-to-delay payments involving the cancer prevention drug Tamoxifen do not violate antitrust law.
The Cipro challenge had been brought by retail pharmacy companies CVS and Rite Aid, which claimed that the Bayer-Barr deal violated the Sherman Act. The plaintiffs, represented by Bruce Gerstein of Garwin Gerstein & Fisher and Steve Shadowen of Hangley Aronchick Segal & Pudlin, filed this brief seeking en banc review.
The plaintiffs were supported by amicus briefs from the Department of Justice, which filed this brief, the American Medical Association, which filed this brief, and the attorneys general of 34 states, who filed this brief. The court did not ask for briefs from the defendants, which gave an indication that the court wasn’t inclined to consider the case in banc.
The court’s order does not explain why it declined to reconsider the Cipro decision. Judge Rosemary Pooler, who was on the panel that urged an en banc review, filed an impassioned dissent. She called pay-to-delay settlements an “unfortunate practice” that serves “no obvious redeeming social purpose.” She noted with alarm the “dramatic surge” in pay-to-delay deals after the Second Circuit issued its Tamoxifen decision: In the five years before, there were no pay-to-delay settlements; In the four years since that ruling, the FTC had identified 53 such deals.
Fred Bartlit Jr. of Bartlit Beck Herman Palenchar & Scott, who represents Bayer in the case, told us he wasn’t surprised that an en banc review was denied. He noted that the Cipro patent at issue had been reaffirmed a half dozen times by various courts, and they had won summary judgment in the trial court below. “Against the background of the repeated findings that the patent was valid, the denial of a rehearing was expected,” he said. He also pointed out that the Supreme Court had denied certiorari in the Tamoxifen case. “The [Cipro] court decided the case based on existing law,” he said. “If you need to change the law, go to Congress.” Lawrence Rosenberg of Jones Day also represented Bayer, but declined to comment. Karen Walker of Kirkland & Ellis, who represents Barr Laboratories, said, “We’re extremely happy. It’s the right decision.”
FTC Commissioner Jon Leibowitz issued this statement: “This decision is a setback for consumers, but the FTC will continue to press the case to put a stop to these pay-for-delay deals, which keep low-cost generic drugs out of the hands of American consumers and cost them $3.5 billion a year in higher prescription prices. We agree with Judge Pooler, who said in her dissent today that the courts should be ‘troubled’ by these anticompetitive agreements.”
Professor Michael Carrier of Rutgers University School of Law-Camden, who helped author an amicus brief urging en banc review on behalf of Consumers Union and other consumer groups, sounded discouraged. “I won’t say it’s the death knell [for eliminating these deals] but it’s pretty close,” he said. “This really was the best chance in the courts we had.” Carrier offered an explanation for why the full court voted 9-1 not to re-hear the case, despite the urging of the three-judge panel. Under Second Circuit rules, only active judges vote on en banc petitions. (The Second Circuit has 10 active judges and 12 senior judges.) “Of the three judges on the initial panel,” he said, “two were senior judges and could not vote on the en banc petition.” That left Pooler to fight this battle alone.
Plaintiffs’ counsel Gerstein and Shadowen were not available to comment on the decision.
This story originally appeared in The Am Law Litigation Daily, a Corporate Counsel sibling publication.