IN THE UNITED STATES COURT OF APPEALS


FOR THE SECOND CIRCUIT


No. 03-7641


IN RE: TAMOXIFEN CITRATE ANTITRUST LITIGATION 

JOBLOVE, et al., 

Plaintiffs-Appellants, 

v. 

BARR LABS., INC., et al., 

Defendants-Appellees. 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT


FOR THE EASTERN DISTRICT OF NEW YORK (HON. I. LEO GLASSER, J.)


BRIEF OF AMICUS CURIAE FEDERAL TRADE COMMISSION


IN SUPPORT OF PLAINTIFFS-APPELLANTS’ PETITION


FOR PANEL REHEARING AND REHEARING EN BANC


SUSAN A. CREIGHTON 

Director 

BRADLEY S. ALBERT 

ELIZABETH R. HILDER 

MICHAEL B. KADES 

Attorneys 

BUREAU OF COMPETITION 

NOVEMBER 30, 2005 

WILLIAM BLUMENTHAL 

General Counsel 

JOHN D. GRAUBERT 

Principal Deputy General Counsel 

JOHN F. DALY 

Deputy General Counsel for Litigation 

IMAD D. ABYAD 

Attorney 

FEDERAL TRADE COMMISSION 

600 PENNSYLVANIA AVENUE, N.W. 

WASHINGTON, DC 20580 

(202) 326-2375 
TABLE OF CONTENTS


Page


TABLE OF AUTHORITIES .................................. ....... ii


INTEREST OF THE AMICUS CURIAE

CERTIFICATE OF SERVICE


............................... 1


ARGUMENT .................................. ................... 2


CONCLUSION .................................. ................. 8


-i­
TABLE OF AUTHORITIES


Cases Page 

Apotex, Inc. v. Pfizer Inc., 

385 F. Supp.2d 187 (S.D.N.Y. 2005) ............................. 7 

Bristol-Myers Squibb Co., 

FTC Dkt. No. C-4076 (April 14, 2003) ........................... 1 

Glaxo Group Ltd. v. Dr. Reddy’s Labs., Ltd., 

325 F. Supp.2d 502 (D.N.J. 2004) ............................... 7 

Hoechst Marion Roussel, Inc., 

FTC Dkt. No. 9293 (May 8, 2001) ............................... 1 

Mutual Pharm. Co., Inc. v. Pfizer Inc., 

307 F. Supp.2d 88 (D.D.C. 2004) ................................ 7 

Schering-Plough Corp., 

FTC Dkt. No. 9297 (Dec. 8, 2003), vacated, Schering-Plough 

Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005), petition for 

cert. filed, (U.S. Aug. 29, 2005) (No. 05-273) ...................... 1 

Teva Pharms. USA, Inc. v. FDA, 

2005 WL 2692489 (D.D.C. Oct. 21, 2005) ........................ 7


-ii­
Cases—Cont’d Page 

Teva Pharms. USA, Inc. v. Pfizer Inc., 

395 F.3d 1324 (Fed. Cir. 2005), cert. denied, 126 S. Ct. 

473 (Oct. 11, 2005) .................................. ......... 6


United States v. Masonite Corp.,


316 U.S. 265 (1942) .................................. ........ 3


United States v. Line Material Co.,


333 U.S. 287 (1948) .................................. ........ 3


United States v. Singer Mfg. Co.,


374 U.S. 174 (1963) .................................. ........ 3


Statutes 

Drug Price Competition and Patent Term Restoration Act of 1984,


(“Hatch-Waxman Act”), Pub. L. No. 98-417, 98 Stat. 1585 ........... 2


Medicare Prescription Drug, Improvement, and Modernization Act


of 2003, Pub. L. No. 108-173, 117 Stat. 2066 .................... 1, 3


§ 1112 .................................. .............. 4


15 U.S.C. §§ 41 et seq. .................................. ........... 1


21 U.S.C. § 355(j)(5)(B)(iii) .................................. ....... 3


-iii­
Statutes—Cont’d Page 

21 U.S.C. § 355(j)(5)(B)(iv) .................................. ....... 3


21 U.S.C. § 355(j)(5)(D) .................................. .......... 6


21 U.S.C. § 355(j)(5)(D)(i)(V) .................................. ..... 4


Miscellaneous 

Centers for Medicare & Medicaid Services, Highlights – National 

Health Expenditures, 2003 (January 11, 2005) ..................... 7


Department of Justice & Federal Trade Commission, Antitrust


Guidelines for the Licensing of Intellectual Property 

(April 1995) .................................. ............... 1


Drug Topics, Top 200 Brand-Name Drugs by Retail Dollars in 2004


(Feb. 21, 2005) .................................. ............ 8


Federal Trade Commission, Generic Drug Entry Prior to Patent


Expiration (July 2002) .................................. .... 1, 7


Federal Trade Commission, To Promote Innovation: The Proper


Balance of Competition and Patent Law and Policy 

(October 2003) .................................. ............ 1


-iv­
Miscellaneous—Cont’d Page 

FTC Bureau of Competition, Agreements Filed with the Federal 

Trade Commission under the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003: Summary of 

Agreements Filed in FY 2004 (Jan. 7, 2005) ....................... 5


Generic Pharmaceuticals Marketplace Access and Consumer


Issues: Hearing Before the Senate Commerce Comm., 

107th Cong. (April 23, 2002) .................................. . 7


Pfizer Inc., Form 10-Q (Aug. 8, 2005) ................................. 8


Purdue Pharma, L.P., Press Release (June 8, 2005) ....................... 8


S. Rep. No. 167, 107th Cong., 2nd Sess. (2002) .......................... 4


The Henry J. Kaiser Family Foundation, Prescription Drug


Trends (Oct. 2004) .................................. ......... 7


Wyeth, Form 10-Q (Aug. 5, 2005) .................................. . . 8


-v­
INTEREST OF THE AMICUS CURIAE


The Federal Trade Commission is an independent federal agency, charged with 

promoting the efficient functioning of the marketplace and protecting consumer 

interests. 15 U.S.C. §§ 41 et seq. It has significant expertise regarding the proper 

balance between antitrust and intellectual property,1 and has brought several law 

enforcement actions targeting the very type of agreement at issue here – i.e., one in 

which the holder of a challenged drug patent harms competition by unjustifiably 

paying a would-be generic entrant to stay off the market.2 The Commission also has 

performed a comprehensive empirical study of generic drug entry,3 and, since January 

2004, has reviewed all drug patent settlementsfiled pursuant to specific congressional 

direction in Pub. L. No. 108-173, 117 Stat. 2066 (2003). In light of the importance 

1 See, e.g., Federal Trade Commission, To Promote Innovation: The 

Proper Balance of Competition and Patent Law and Policy (October 2003), available 

at www.ftc.gov/os/2003/10/innovationrpt.pdf;Department ofJustice&FederalTrade 

Commission, Antitrust Guidelines for the Licensing of Intellectual Property (April 

1995), available at www.usdoj.gov/atr/public/guidelines/0558.htm. 

2 See, e.g., Schering-Plough Corp., FTC Dkt. No. 9297 (Dec. 8, 2003), 

vacated, Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005), petition for 

cert. filed, (U.S. Aug. 29, 2005) (No. 05-273); Bristol-Myers Squibb Co., FTC Dkt. 

No. C-4076 (April 14, 2003); Hoechst Marion Roussel, Inc., FTC Dkt. No. 9293 

(May 8, 2001). The Commission’s petition for certiorari in Schering, which 

addresses the merits of the issues presented at greater length, is available at 

www.ftc.gov/os/2005/08/050829scheringploughpet.pdf. 

3 Federal Trade Commission, Generic Drug Entry Prior to Patent 

Expiration (July 2002), available at www.ftc.gov/os/2002/07/genericdrugstudy.pdf. 
of the issues here to its mandated mission, and the risk to consumer welfare, the 

Commission submits this brief as amicus curiae in support of rehearing en banc. 

ARGUMENT 

As plaintiffs-appellants have shown in their petition for rehearing, the panel’s 

majority opinion conflicts with basic principles of antitrust law in numerous respects, 

the most egregious example of which is condoning agreements that harm competition 

and consumers on the ground that they make “economic sense” to the parties who 

profit from them. Pet. for Rehearing at 13-14; cf. Op. 44-47. The Commission will 

focus, however, on two areas with which it has particular familiarity, and that provide 

compelling reasons for further review — the panel’s disregard for the policies and 

incentives of the Hatch-Waxman Act, Pub. L. No. 98-417, 98 Stat. 1585 (1984), and 

the practical ramifications of the panel’s ruling. A proper analysis of these issues 

shows that the panel failed to give proper consideration to the Hatch-Waxman Act, 

and, as a result, adopted a rule that will greatly harm the health and economic wellbeing of American consumers. This Court should therefore rehear the case en banc. 

1. The panel majority’s analysis proceeds from the misconceived premise that 

the general judicial policy favoring the settlement of litigation, Op. 31, commands 

such force that it precludes condemnation of private agreements even if they ensure 

“the survival of monopolies created by what would otherwise be fatally weak 

patents.” Op. 53. The panel cites no authority for this ipse dixit, which contravenes 

-2­

basic principles of antitrust law.4

 The panel’s policy-based analysis is especially misguided in the Hatch-Waxman context, however, because Congress – while preserving 

legitimate patent rights – has specifically sought to encourage litigation challenging 

weak patent claims, in order to facilitate entry of generic drugs into the market. 

Hatch-Waxman encourages patent challenges by providing the first generic 

applicant making a “Paragraph IV certification” – which challenges the validity or 

infringement of the brand-drug patent – with 180 days of marketing exclusivity. 21 

U.S.C. § 355(j)(5)(B)(iv). No such economic incentive is provided for generic filings 

that do not challenge the brand-drug patent. Congress likewise created an incentive 

for the patent holder to commence the patent suit promptly. The patent holder 

receives an automatic 30-month stay against generic entry if, but only if, it sues for 

infringement within 45 days. 21 U.S.C. § 355(j)(5)(B)(iii). Otherwise, the FDA may 

approve the generic application as soon as the regulatory conditions are fulfilled. Id. 

Congress reinforced its statutory policy to encourage litigation challenges to 

pharmaceutical patents through amendments to Hatch-Waxman enacted as part of the 

2003 Medicare amendments. See 117 Stat. 2066, 2448-2464 (2003). Those amend4 The Supreme Court has long admonished that a patent owner “cannot 

extend his statutory grant by contract or agreement,” United States v. Masonite Corp., 

316 U.S. 265, 277 (1942); see United States v. Line Material Co., 333 U.S. 287, 308 

(1948), and has applied this principle to the settlement of patent litigation, see United 

States v. Singer Mfg. Co., 374 U.S. 174, 197-200 (1963) (White, J., concurring). 

-3­
ments, largely prompted by congressional concern over the competitive effects of 

agreements such as those at issue here, sought in part to stamp out the “abuse of the 

Hatch-Waxman law” resulting from “pacts between big pharmaceutical firms and 

makers of generic versions of brand name drugs, that are intended to keep lower-cost 

drugs off the market.” S. Rep. No. 167, 107th Cong., 2nd Sess., at 4 (2002).5 

The panel majority noted that Hatch-Waxman altered the litigants’ bargaining 

positions, but the panel drew entirely the wrong lesson from Congress’s modification 

of the respective rights of patentees and challengers in the pharmaceutical context – 

characterizing it as an “unintended consequence.” Op. 40. In fact, as evident from 

its 2003 amendments, Congress made those alterations for the very purpose of 

facilitating successful patent challenges and permitting the early entry of generics. 

Thus, viewed in their proper statutory context, exclusionary or “reverse” payments 

cannot be summarily excused as “a natural by-product of the Hatch-Waxman 

process,” id., when they may be more of an artifice to subvert its intended policies. 

In the face of Congress’s efforts to create incentives for patent challenges that 

result in early generic entry, the panel has adopted a rule that will have precisely the 

5 Among the corrective measures enacted to address such abuses, the 

amendments require brand drug companies and generic applicants who enter into 

patent litigation settlements to file those settlement agreements with the Commission 

and the Department of Justice for antitrust review. Pub. L. No. 108-173, § 1112. If 

such an agreement is found to violate the antitrust laws, the generic party forfeits any 

180-day marketing exclusivity period it may have. 21 U.S.C. § 355(j)(5)(D)(i)(V). 

-4­

opposite effect. By giving branded and generic rivals carte blanche to avoid competition and share the resulting profits, even where the patent claims are “fatally weak,” 

Op. 53, successful drug patent challenges will be significantly reduced, if not 

eliminated.

6

 In so doing, the panel gave insufficient weight to Congress’s policy 

choices, as reflected in Hatch-Waxman, and substituted instead its own preferences 

and judgments about the appropriate patent policy in the pharmaceutical industry.7 

2. The panel majority acknowledges this “troubling dynamic,” Op. 50, but 

attempts to dismiss the practical ramifications of its ruling by assuming that branded 

drug sellers will be unable to buy off all challengers. Op. 51-52. But that assumption 

6 The generic’s anticipated profits are almost always well under those of 

the branded rival from the same volume of sales. Thus, absent antitrust constraints, 

it will almost always “make obvious economic sense,” Op. 46, for the latter to buy off 

generics by paying them as much or (as alleged here) more than they would make by 

entering. Moreover, as the majority conceded, exclusion payments are most likely to 

be used to protect the weakest patents. Op. 50 (“The less sound the patent or the less 

clear the infringement, and therefore the less justified the monopoly enjoyed by the 

patent holder, the more a rule permitting settlement is likely to benefit the patent 

holder by allowing it to retain the patent”). 

7 The majority implies that it was somehow constrained to rule as it did 

because the alternative to allowing reverse-payment settlements is “to outlaw all, or 

nearly all, settlements of Hatch-Waxman infringement actions.” Op. 52. Such dire 

warnings are unwarranted, however; legitimate drug patent settlements using means 

other than exclusionary payments continue to occur without hindrance. See FTC 

Bureau of Competition, Agreements Filed with the Federal Trade Commission under 

the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Jan. 

2005), available at www.ftc.gov/os/2005/01/050107medicareactrpt.pdf (of the 14 

settlements filed in FY 2004, resolving patent litigation between brand- and generic 

drug makers, none included an exclusionary payment from the brand to the generic). 

-5­

is both economically and legally baseless. Even apart from regulatory constraints, the 

economics of generic drug entry dictate that settlements imposing great harm on 

competition and consumers will frequently be possible. Paying off the first generic 

company ready to enter will often delay entry for years, during which time the 

branded company will profit handsomely, at the expense of consumers. If, on the 

other hand, multiple generics are ready to enter, the prospective profits of each will 

be substantially lower, and each will find it advantageous to agree not to enter, even 

for a modest payment. In either event, the panel’s ruling would allow the branded 

company to forestall competition even if its patent claims are weak. 

More important, the impact of the panel’s ruling will be magnified by the effect 

of Hatch-Waxman’s 180-day exclusivity provision. As amended by Congress in 

2003, the limited circumstances under which the exclusivity period may be forfeited 

depend upon resolution of an infringement or declaratory judgment suit. 21 U.S.C. 

§ 355(j)(5)(D). A recent ruling of the Federal Circuit, moreover, makes clear that 

declaratory judgment is unavailable if the branded company does not threaten to sue. 

See Teva Pharms. USA, Inc. v. Pfizer Inc., 395 F.3d 1324 (Fed. Cir. 2005), cert. 

denied, 126 S. Ct. 473 (Oct. 11, 2005). Thus, having settled with the first challenger, 

a branded company can preempt all subsequent generic challenges simply by 

declining to sue or threaten suit against them. With declaratory judgment unavailable 

following Teva, future generic applicants will be unable to enter and compete. 

-6­

Indeed, a troubling trend by branded companies towards employing just such a 

strategy is increasingly evident.8 Under the panel ruling, pharmaceutical companies 

are now free to pursue this anticompetitive ploy without fear of antitrust liability. 

3. Once the legal and regulatory ramifications of the panel ruling are properly 

understood, the economic effects are staggering. Consumers and health plans spend 

over a hundred billion dollars per year on prescription drugs.9 Facilitated by the 

Hatch-Waxman incentive structure, numerous generics have successfully challenged 

listed patents, including those of a number of “blockbuster” drugs with annual sales 

in the billions.

10 Moreover, of the twenty top-selling prescription drugs in the United 

States today, eleven, with annual sales of nearly $25 billion, currently are the subject 

8 See, e.g., Teva Pharms. USA, Inc. v. FDA, 2005 WL 2692489 (D.D.C. 

Oct. 21, 2005); Apotex, Inc. v. Pfizer Inc., 385 F. Supp.2d 187 (S.D.N.Y. 2005); 

Glaxo Group Ltd. v. Dr. Reddy’s Labs., Ltd., 325 F. Supp.2d 502 (D.N.J. 2004); 

Mutual Pharm. Co., Inc. v. Pfizer Inc., 307 F. Supp.2d 88 (D.D.C. 2004). 

9 In 2002 alone, for example, Americans spent over $160 billion for 

prescription drugs. The Henry J. Kaiser Family Foundation, Prescription Drug 

Trends, at 1 (Oct. 2004). See also Centers for Medicare & Medicaid Services, 

Highlights – National Health Expenditures, 2003, at 1 (January 11, 2005) 

(prescription drug spending rose 14.9 percent in 2002 and 10.7 percent in 2003). 

10 The FTC examined all patentlitigationsinitiated between 1992 and 2000 

between branded drug manufacturers and generic challengers, and found that the 

generics prevailed in cases involving 73 percent of the challenged drug products. 

Generic Drug Study, supra note 3, at 19-20. Generic competition to Prozac, Zantac, 

Taxol, and Plantinol alone is estimated to have saved consumers more than $9 billion. 

See Generic Pharmaceuticals Marketplace Access and Consumer Issues: Hearing 

Before the Senate Commerce Comm., 107th Cong. (April 23, 2002) (statement of 

Kathleen D. Jaeger, President & CEO, Generic Pharmaceutical Association), at 12. 

-7­

of litigation by generic firms seeking entry under Hatch-Waxman.11 The prospect of 

consumer benefits from such challenges is enormous, but such benefits will be lost 

if branded companies are free to buy off generic challengers, regardless of the 

weakness of the patent or the terms of the deal, as the panel’s opinion permits. 

CONCLUSION 

The Court should grant rehearing, to correct the panel’s dangerous error. 

Respectfully submitted, 

WILLIAM BLUMENTHAL 

SUSAN A. CREIGHTON General Counsel 

Director JOHN D. GRAUBERT 

BRADLEY S. ALBERT Principal Deputy General Counsel 

ELIZABETH R. HILDER 

MICHAEL B. KADES ________________________________ 

Attorneys JOHN F. DALY 

BUREAU OF COMPETITION Deputy General Counsel for Litigation 

IMAD D. ABYAD 

Attorney 

FEDERAL TRADE COMMISSION 

600 PENNSYLVANIA AVENUE, N.W. 

WASHINGTON, DC 20580 

NOVEMBER 30, 2005 (202) 326-2375 

11 See Drug Topics, Top 200 Brand-Name Drugs by Retail Dollars in 2004 

(Feb. 21, 2005), available at www.drugtopics.com/drugtopics/data/articlestandard/ 

drugtopics/112005/150644/article.pdf. SEC filings and public statements by their 

makers disclose patent challenges for the following 11 drugs: Lipitor, Effexor-XR, 

Plavix, Celebrex, Neurontin, Protonix, Norvasc, Zyprexa, OxyContin, Fosamax, and 

Risperdal. See, e.g., Pfizer Inc., Form 10-Q (Aug. 8, 2005); Wyeth, Form 10-Q (Aug. 

5, 2005); Purdue Pharma, L.P., Press Release (June 8, 2005). 

-8­
____________________________ 

CERTIFICATE OF SERVICE


I, Imad Abyad, certify that on this 30th day of November, 2005, I caused a copy 

of the foregoing brief of amicus curiae Federal Trade Commission to be served by 

first-class mail, postage prepaid, and electronically, on each of the following counsel: 

J. Douglas Richards, Esq. 

MILBERG WEISS BERSHAD & SCHULMAN 

One Pennsylvania Plaza 

New York, NY 10119-0165 

DRichards@milbergweiss.com 

Patrick E. Cafferty 

MILLER FAUCHER & CAFFERTY 

101 N. Main St., Suite 450 

Ann Arbor, MI 48104 

pcafferty@millerfaucher.com 

Barbara J. Hart, Esq.


LABATON SUCHAROW & RUDOFF


100 Park Avenue, 12th Flr.


New York, NY 10017


bhart@labaton.com


Robert S. Schachter, Esq.


ZWERLING, SCHACHTER & ZWERLING


41 Madison Avenue, 32nd Flr.


New York, NY 10017


rschachter@zsz.com


Robert G. Eisler, Esq.


LIEFF CABRASER HEIMANN & BERNSTEIN


780 Third Avenue, 48th Flr.


New York, NY 10017


reisler@lchb.com 

Co-Lead Counsel for Plaintiffs-Appellants 

Joel Cohen 

DAVIS, POLK & WARDELL 

450 Lexington Avenue 

New York, NY 10017 

joel.cohen@dpw.com 

Counsel for Defendants-Appellees

 Zeneca, Inc., AstraZeneca 

 Pharmaceuticals LP, and 

AstraZeneca PLC 

George Lombardi 

WINSTON & STRAWN 

35 West Wacker Drive 

Chicago, IL 60601 

jlombardi@winston.com 

Counsel for Defendant-Appellee

 Barr Laboratories, Inc. 

IMAD D. ABYAD 

Attorney 

FEDERAL TRADE COMMISSION