No. 20-2402

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

–––––––––––––––––––––––––––––––––––––––––––––

UFCW LOCAL 1500 WELFARE FUND, ET AL.,

Plaintiffs-Appellants,

v.

ABBVIE, INC., ET AL.,

Defendants-Appellees.

–––––––––––––––––––––––––––––––––––––––––––––

On Appeal from the United States District Court 

for the Northern District of Illinois

No. 1:19-cv-01873

Hon. Manish S. Shah

–––––––––––––––––––––––––––––––––––––––––––––

BRIEF OF AMICUS CURIAE THE FEDERAL TRADE COMMISSION 

IN SUPPORT OF NO PARTY

–––––––––––––––––––––––––––––––––––––––––––––

IAN R. CONNER

Director

GAIL LEVINE 

Deputy Director

MARKUS H. MEIER

Assistant Director

BRADLEY S. ALBERT

KARA L. MONAHAN 

Deputy Assistant Directors

TIMOTHY KAMAL-GRAYSON

Attorney

Bureau of Competition

ALDEN F. ABBOTT

General Counsel

JOEL MARCUS

Deputy General Counsel

BRADLEY DAX GROSSMAN

Attorney

Office of the General Counsel 

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-2994

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
TABLE OF CONTENTS

Introduction and Summary........................................................................................... 1

Interest of Amicus Curiae ............................................................................................. 3

Statement....................................................................................................................... 5

A. Principles For Analyzing Reverse-Payment Settlements............................ 5

B. The Marketplace and Regulatory Framework for Biologics ........................ 9

C. Proceedings Below ....................................................................................... 11

Argument ..................................................................................................................... 12

I. Under Actavis, The Legality Of A Patent Settlement Turns On The 

Presence Of A Large Reverse Payment And The Reasons For It, Not 

“Early” Entry ....................................................................................................... 13

II. Policies Favoring Litigation Settlement Cannot Make Lawful A Large 

And Unjustified Reverse Payment...................................................................... 18

Conclusion.................................................................................................................... 20

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- ii -

TABLE OF AUTHORITIES

Cases

Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399 (2012)....................... 4

FTC v. AbbVie Inc.,

No. 18-2621, 2020 WL 5807873 (3d Cir. Sep. 30, 2020) ........................... 8, 9, 17, 18

FTC v. Actavis, Inc.,

570 U.S. 136 (2013) .................................1, 3, 5, 6, 7, 8, 12, 13, 14, 15, 16, 17, 18, 19

FTC v. Indiana Fed’n of Dentists, 476 U.S. 447 (1986).............................................. 14

FTC v. Watson Pharm., Inc., 677 F.3d 1298 (11th Cir. 2012)...................................... 6

In re Aggrenox Antirust Litig., 94 F. Supp. 3d 224 (D. Conn. 2015)............................ 7

In re Androgel Antitrust Litig. (No. II),

No. 1:09-cv-955-TWT, 2018 WL 2984873 (N.D. Ga. June 14, 2018)........................ 4

In re Cipro Cases I & II, 348 P.3d 845 (Cal. 2015)................................................. 5, 18

In re Impax Labs., Inc., No. 9373, 2019 WL 1552939 (F.T.C. Mar. 28, 2019)....... 4, 19

In re Lipitor Antitrust Litigation, 868 F.3d 231 (3d Cir. 2017)........................ 8, 12, 16

King Drug Co. of Florence v. Cephalon, Inc.,

88 F. Supp. 3d 402 (E.D. Pa. 2015)........................................................................ 4, 7

King Drug Co. of Florence, Inc. v. Smithkline Beecham Corp.,

791 F.3d 388 (3d Cir. 2015)............................................................................ 4, 6, 7, 8

Statutes

42 U.S.C. § 262............................................................................................................. 10

Biologics Price Competition and Innovation Act (BPCIA),

Pub. L. No. 111-148, §§ 7001-7003, 124 Stat. 119, 804-21 (2010).......................... 10

Hatch-Waxman Act, Pub. L. No. 98-417, 98 Stat. 1585 (1984).................................. 10

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- iii -

Other Authorities

Fed. Trade Comm’n, Authorized Generic Drugs: Short-Term Effects and Long-Term 

Impact (2011), http://www.ftc.gov/os/2011/08/2011genericdrugreport.pdf .............. 4

Fed. Trade Comm’n, Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers 

Billions (2010), https://www.ftc.gov/sites/default/files/documents/reports/paydelay-how-drug-company-pay-offs-cost-consumers-billions-federal-tradecommission-staff-study/100112payfordelayrpt.pdf................................................... 4

Food & Drug Admin., Implementation of the Biologics Price Competition and 

Innovation Act of 2009 (Feb. 12, 2016), https://www.fda.gov/drugs/guidancecompliance-regulatory-information/implementation-biologics-price-competitionand-innovation-act-2009 .......................................................................................... 10

Joint Statement of the Food & Drug Administration and the Federal Trade 

Commission Regarding a Collaboration to Advance Competition in the Biologic 

Marketplace (Feb. 3, 2020), 

https://www.ftc.gov/system/files/documents/public_statements/1565273/v190003fd

aftcbiologicsstatement.pdf ..................................................................................... 4, 9

Statement of the Federal Trade Comm’n to the Dep’t of Health and Human Servs. 

Regarding the HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket 

Costs at 8 (July 16, 2018), 

https://www.ftc.gov/system/files/documents/advocacy_documents/statementfederal-trade-commission-department-health-human-services-regarding-hhsblueprintlower/v180008_commission_comment_to_hhs_re_blueprint_for_lower_drug_prices

_and_costs.pdf ............................................................................................................ 9

Rules

Fed. R. Civ. P. 29(a)....................................................................................................... 5

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 1 -

INTRODUCTION AND SUMMARY

Generic drug competition saves consumers hundreds of billions of dollars 

each year. To encourage such competition, Congress has established mechanisms to 

enable generic manufacturers to challenge patents associated with a brand-name 

drug. But antitrust problems can arise when parties settle these patent disputes 

with the patentee paying its would-be competitor to drop its challenge and stay off

the market. These agreements are known as “reverse-payment” settlements

because “a party with no claim for damages ... walks away with money simply so it 

will stay away from the patentee’s market.” FTC v. Actavis, Inc., 570 U.S. 136, 152 

(2013). The antitrust concern with these settlements is that the brand

manufacturer and its potential competitors may have agreed to preserve and share

the brand’s monopoly profits rather than compete. The drugmakers come out 

ahead, but consumers suffer because they are forced to continue paying higher, noncompetitive prices. 

In Actavis, the Supreme Court held that reverse-payment settlements create 

a “risk of significant anticompetitive effects” and must be analyzed under the 

antitrust rule of reason. Id. at 158-59. The potential anticompetitive harm from 

this type of agreement is that the payment “prevent[s] the risk of competition” and 

may allow the parties to “maintain supracompetitive prices to be shared among the 

patentee and the challenger rather than face what might have been a competitive 

market.” Id. at 157. 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 2 -

Plaintiffs here allege—among other claims—that AbbVie, maker of the antiinflammatory biologic drug Humira, paid its would-be biosimilar rivals to stop 

challenging AbbVie’s patents and to refrain from selling their products in the 

United States for at least five years. The alleged payment consisted of AbbVie’s 

agreement to grant patent licenses permitting lucrative competition in Europe. The 

district court dismissed the complaint in its entirety, concluding that its reversepayment charges (and the other counts) failed to state a claim. 

The Federal Trade Commission submits this amicus brief to assist the Court 

in evaluating the district court’s decision to dismiss the reverse-payment counts. 

Although we take no position on the ultimate merits of this case or whether the 

allegations are sufficient to state a claim, we are concerned that the district court’s 

analysis is inconsistent with Actavis in two critical ways that could impede

enforcement of the antitrust laws if left uncorrected. 

First, the court placed undue weight on the fact that the challenged

settlements allowed “early” competition before AbbVie’s patents expired. In parts of 

the opinion, the district court appeared to conclude that “early” entry automatically

meant that the settlements could not have contained reverse payments. Op. 44-45. 

Elsewhere, the court seemed to reason that even if the settlements contained

reverse payments, their provision for entry dates before the expiration of AbbVie’s 

patents made them procompetitive as a matter of law. Op. 46-47. Either approach 

conflicts with Actavis, which overruled a line of decisions (known as the “scope-ofthe-patent” test) holding that a reverse-payment settlement is exempt from 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 3 -

antitrust scrutiny solely because it involves entry before patent expiration. 570 

U.S. at 147-48. Here, the district court’s analysis—with its emphasis on the 

settlements’ “early” entry dates—resembles the scope-of-the-patent test rejected by 

Actavis. 

Instead, the Actavis inquiry focuses on whether a patent-holder has offered

the challenger “a share of its monopoly profits” in exchange for the challenger’s 

agreement to stop contesting the patents and stay out of the market for some 

period. Id. at 141, 153-54. Because those patents “may or may not be valid, and 

may or may not be infringed,” reverse-payment settlements harm consumers if they 

amount to an agreement to share monopoly profits to eliminate the risk of earlier 

competition. Id. at 147. Accordingly, when parties settle with a reverse payment, 

the proper question under Actavis is why the parties did so. If the “basic reason” for 

the payment “is a desire to maintain and to share patent-generated monopoly 

profits,” then the antitrust laws are likely to condemn it. Id. at 158. 

Second, the district court opined that dismissing the complaint will help 

“encourag[e] patent litigants to settle worldwide patent disputes.” Op. 46. Be that 

as it may, Actavis held that the public interest in promoting settlement “should not 

determine the result” in cases involving unjustified reverse payments that purchase 

additional monopoly time. 570 U.S. at 153-54.

INTEREST OF AMICUS CURIAE

The FTC is an independent federal agency charged with promoting a 

competitive marketplace and protecting consumer interests. As exemplified by its 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 4 -

role as petitioner in Actavis, the Commission has primary responsibility for federal 

antitrust enforcement in the pharmaceutical industry. 

The Commission has used its law enforcement authority to challenge 

anticompetitive patent settlements administratively and in federal district courts.1 

In addition, the Commission has issued empirical studies addressing the 

competitive effects of generic substitution for brand-name drugs.2 The Supreme 

Court and other federal courts have relied on those studies. See, e.g., Caraco 

Pharm. Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 408 (2012); King Drug Co. of 

Florence, Inc. v. Smithkline Beecham Corp., 791 F.3d 388, 404 n.21 (3d Cir. 2015). 

The FTC also obtains and reviews patent settlement agreements between 

drugmakers and works with the Food and Drug Administration to deter

anticompetitive behavior in the burgeoning marketplace for biological medicines

and follow-on biosimilar products.3 

 1 See, e.g., In re Impax Labs., Inc., No. 9373, 2019 WL 1552939 (F.T.C. Mar. 28, 

2019), appeal pending, No. 19-60394 (5th Cir.); King Drug Co. of Florence v. 

Cephalon, Inc., 88 F. Supp. 3d 402 (E.D. Pa. 2015); In re Androgel Antitrust Litig. 

(No. II), No. 1:09-cv-955-TWT, 2018 WL 2984873, at *1 (N.D. Ga. June 14, 2018).

2 See Fed. Trade Comm’n, Authorized Generic Drugs: Short-Term Effects and LongTerm Impact (2011), http://www.ftc.gov/os/2011/08/2011genericdrugreport.pdf; Fed. 

Trade Comm’n, Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers 

Billions (2010), https://www.ftc.gov/sites/default/files/documents/reports/pay-delayhow-drug-company-pay-offs-cost-consumers-billions-federal-trade-commission-staffstudy/100112payfordelayrpt.pdf. 

3 See, e.g., Joint Statement of the Food & Drug Administration and the Federal 

Trade Commission Regarding a Collaboration to Advance Competition in the 

Biologic Marketplace (Feb. 3, 2020) (“FDA-FTC Statement”), 

https://www.ftc.gov/system/files/documents/public_statements/1565273/v190003fdaf

tcbiologicsstatement.pdf.

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 5 -

Because the Commission has a strong interest in ensuring the proper 

application of Actavis, we respectfully submit this brief under Fed. R. Civ. P. 29(a). 

We do not advocate for any particular result in this case, but write simply to correct 

two legal errors in the district court’s treatment of Actavis. 

STATEMENT 

A. Principles For Analyzing Reverse-Payment Settlements

In most cases, drug companies may settle their patent disputes free of 

antitrust concerns by agreeing upon a date when the generic will enter the market 

“without the patentee paying the challenger to stay out prior to that point.” 

Actavis, 570 U.S. at 158. Absent a reverse payment, the settlement’s entry date 

presumably reflects the parties’ “approximation of the expected level of competition 

that would have obtained had the parties litigated.” In re Cipro Cases I & II, 348 

P.3d 845, 865 (Cal. 2015).

It is another story when a drug patentee pays a would-be rival a share of its 

monopoly profits to drop its patent challenge and keep away from the market until 

a specific date. Unless the payment has some other, legitimate rationale—such as 

the patentee’s saved litigation costs or compensation for bona fide services

performed by the generic—it “would normally suggest that the patentee has serious 

doubts about the patent’s survival.” Actavis, 570 U.S. at 157. That “in turn 

suggests that the payment’s objective is to maintain surpracompetitive prices to be 

shared among the patentee and the challenger rather than face what might have 

been a competitive market—the very anticompetitive consequence that underlies 

the claim of antitrust unlawfulness.” Id. The brand-name manufacturer is, in 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 6 -

effect, “leverag[ing] some part of its patent power ... its supracompetitive profits” to 

eliminate the “risk of competition” prior to the licensed entry date. Smithkline 

Beecham, 791 F.3d at 406. 

In Actavis, the Supreme Court held that reverse-payment patent settlements

can violate the antitrust laws even if they allow competition before the brand’s

patents expire. 570 U.S. at 159-60. The FTC’s complaint in that case had alleged 

that a brand manufacturer settled a challenge to its patent through agreements to 

pay generic rivals to stay off the market for nine years, and disguised those 

payments as compensation for services the generics would perform. Id. at 145. The 

settlement nonetheless allowed the generics to enter the market 65 months before 

the patent expired. Id. The district court dismissed the complaint, and the 

Eleventh Circuit affirmed. It reasoned that because the settlement allowed entry 

before patent expiration, it was “immune from antitrust attack” since the

anticompetitive effects were all within “the scope of the exclusionary potential of the 

patent.” FTC v. Watson Pharm., Inc., 677 F.3d 1298, 1312 (11th Cir. 2012).

The Supreme Court reversed. The Court rejected the “scope-of-the-patent”

test applied by the court of appeals and its resulting immunity for settlement 

agreements that allow entry before patent expiration. Actavis, 570 U.S. at 146-48. 

The Court explained that a reverse payment “in effect amounts to a purchase by the 

patentee of the exclusive right to sell its product, a right it already claims but would 

lose if the patent litigation were to continue and the patent were held invalid or not 

infringed by the generic product.” Id. at 153-54. The payment “simply keeps prices 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 7 -

at patentee-set levels” while “dividing that return between the challenged patentee 

and the patent challenger.” Id. at 154. As a result of this sharing of the rewards 

from avoiding competition, “[t]he patentee and the challenger gain” but “the 

consumer loses.” Id. 

The Court thus held that the FTC had stated a viable antitrust claim even 

though the settlement at issue allowed generics to compete more than five years

before the brand’s patent expired. Id. at 145. “Notwithstanding such ‘early entry,’

the antitrust problem was that ... entry might have been earlier, and/or the risk of 

competition not eliminated, had the reverse payment not been tendered.” 

Smithkline Beecham, 791 F.3d at 408. After Actavis, many federal courts have 

ruled that reverse-payment settlements may have been anticompetitive even 

though they allowed generics to launch years before the patents expired. See, e.g., 

id. at 397 (37 months before expiration); In re Aggrenox Antirust Litig., 94 F. Supp. 

3d 224, 236 (D. Conn. 2015) (18 months); King Drug Co. of Florence, Inc. v. 

Cephalon, Inc., 88 F. Supp. 3d 402, 407, 419 (E.D. Pa. 2015) (three years).

Reverse payments may be either in cash or in-kind. In the earliest reverse 

payments, brand companies simply paid cash in exchange for the generic’s

abandonment of its patent challenge. Over time, as the FTC and courts began to 

scrutinize these settlements, parties found more sophisticated and less obvious 

ways to transfer value in exchange for staying off the market. The settlement in

Actavis, for example, featured lucrative side deals in which the brand made 

payments that “[t]he companies described ... as compensation for other services the 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 8 -

generics promised to perform,” but which the FTC claimed “had little value.” 570 

U.S. at 145. Another common provision in these agreements involved the brand’s 

commitment not to launch its own authorized generic (or “AG”) to compete with, 

and take revenue from, the first generic once it enters. See Smithkline Beecham, 

791 F.3d at 403-05.

A brand-name patentee may also make a reverse payment by giving its

would-be generic rival some other type of noncash concession or consideration. For 

instance, in In re Lipitor Antitrust Litigation, 868 F.3d 231 (3d Cir. 2017), a generic 

manufacturer allegedly agreed to defer launch of generic Lipitor for over three years 

in exchange for a brand manufacturer’s release of a damages claim worth hundreds 

of millions of dollars in a lawsuit over a different drug. Id. at 243-44, 253. The 

Third Circuit held that the plaintiffs alleged sufficient facts to show that the 

damages release plausibly served as a quid pro quo for the Lipitor patent 

settlement. Id. at 254-57. 

Most recently, in FTC v. AbbVie Inc., No. 18-2621, 2020 WL 5807873 (3d Cir. 

Sep. 30, 2020), AbbVie allegedly induced a rival to defer launching a generic version 

of AndroGel with a reverse payment in the form of an agreement to supply another 

AbbVie product, TriCor. For the generic company, the TriCor deal was worth 

“nearly $175 million over a four-year period,” more than its projected earnings from 

selling generic AndroGel. Id. at *18. The Third Circuit reversed the district court’s 

dismissal of the complaint’s charge of an unlawful reverse payment. The lower 

court had wrongly refused to accept as true the allegation that the AndroGel and 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 9 -

TriCor deals were “linked” and that the supply agreement made economic sense 

only if it were a vehicle for AbbVie to compensate the generic for refraining from 

competition with brand-name AndroGel. Id. at *17-20. The Third Circuit stressed 

that “a reverse payment’s legality depends mainly on its economic substance, not its 

form,” id. at *17, and that to analyze the two deals separately would “elevate[] form 

over substance,” id. at *19.

B. The Marketplace and Regulatory Framework for Biologics

Biological medicines—drugs derived from living organisms—can treat many 

otherwise untreatable conditions, but they come at a steep price: at a cost of up to 

$200,000 per patient per year, they account for 37 percent of all prescription 

spending.4 A few biologics have faced competition from biosimilars, a generic 

analog for biological drugs, which are typically priced 15 to 35 percent lower than 

those of the original “reference” biologic.5 

To foster biologic competition, Congress enacted the Biologics Price 

Competition and Innovation Act (BPCIA), Pub. L. No. 111-148, §§ 7001-7003, 124 

 4 FDA-FTC Statement, supra note 3, at 1; Statement of the Federal Trade Comm’n to 

the Dep’t of Health and Human Servs. Regarding the HHS Blueprint to Lower Drug 

Prices and Reduce Out-of-Pocket Costs at 8 (July 16, 2018) (“FTC Blueprint

Statement”), 

https://www.ftc.gov/system/files/documents/advocacy_documents/statement-federaltrade-commission-department-health-human-services-regarding-hhs-blueprintlower/v180008_commission_comment_to_hhs_re_blueprint_for_lower_drug_prices_a

nd_costs.pdf.

5 FDA-FTC Statement, supra note 3, at 2-3; FTC Blueprint Statement, supra note 4,

at 11-12 & n.54. 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 10 -

Stat. 119, 804-21 (2010).6 The BPCIA creates a streamlined pathway for regulatory 

approval of products demonstrated to be biosimilar to or interchangeable with a

biologic. Four years after the FDA approves a biologic, a rival manufacturer may 

file an abbreviated biologic license application (ABLA) to market a biosimilar once 

the reference biologic has been approved for 12 years, 42 U.S.C. § 262(k)(7),

262(k)(2)(A).7 

The statute also establishes a five-step process (often called the “patent 

dance”) in which the biologic manufacturer and the would-be competitor attempt to 

resolve or refine any patent disputes. See 42 U.S.C. § 262(l). At the end of this 

process, the ABLA filer and the biologic manufacturer exchange a list of patents 

that will be subject to litigation. 42 U.S.C. § 262(l)(5). Within 30 days, the biologic 

manufacturer must sue to test the patents that appear on either party’s list. 42 

U.S.C. § 262(l)(6). The FDA may approve a new biosimilar or interchangeable 

product while patent litigation is pending, but the applicant must notify the biologic 

manufacturer 180 days before introducing its product. 42 U.S.C. § 262(l)(8)(A).

 6 The BPCIA is similar in concept to the Hatch-Waxman Act, Pub. L. No. 98-417, 98 

Stat. 1585 (1984), which governs the process for bringing generic conventional drugs 

to market. See Food & Drug Admin., Implementation of the Biologics Price 

Competition and Innovation Act of 2009 (Feb. 12, 2016), 

https://www.fda.gov/drugs/guidance-compliance-regulatoryinformation/implementation-biologics-price-competition-and-innovation-act-2009.

7 The applicant needn’t prove anew that the biosimilar is safe or effective so long as 

it shows that the product is “highly similar to the reference product 

notwithstanding minor differences in clinically inactive components,” and has “no 

clinically meaningful differences ... [from] the reference product in terms of the 

safety, purity, and potency of the product.” 42 U.S.C. § 262(i)(2).

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 11 -

C. Proceedings Below

AbbVie’s biologic Humira has been the highest-earning drug in the United 

States for the last six years, at a cost of up to $50,000 per patient per year. D. Ct. 

ECF No. 109 ¶¶ 2, 84. Several potential biosimilar competitors filed ABLAs and 

challenged AbbVie’s patents, after which AbbVie sued. The parties allegedly agreed 

to settle the disputes, with AbbVie letting the competitors enter the European 

market almost immediately and the domestic market in 2023. Id. ¶¶ 151, 157-84, 

203.

The complaint charges that AbbVie violated the antitrust laws in three ways. 

First, AbbVie allegedly obtained a “thicket” or “minefield” of over 100 deficient 

patents and, despite the weakness of its patents, embroiled its rivals in protracted 

litigation designed to deter them from launching. Id. ¶¶ 4, 296-98. Second, AbbVie 

allegedly entered into “market division” agreements with its rivals whereby AbbVie 

maintained its domestic monopoly in return for forfeiting its European one. Id.

¶¶ 9, 280-83. Third, the European licenses allegedly functioned as large and 

unjustified reverse payments by AbbVie to keep rivals out of the domestic market.

Id. ¶¶ 203, 263-64. The net result, plaintiffs charge, is that “AbbVie has 

maintained its Humira monopoly in the U.S., where patients and customers are, in 

effect, subsidizing lower prices charged for biosimilars in Europe.” Id. ¶ 206.

The district court dismissed the complaint for failure to state a claim. With 

respect to the reverse-payment claim, the court purported to accept the truth of the 

complaint’s charge that the European licenses amounted to a “large” “transfer of 

value” to AbbVie’s biosimilar competitors in exchange for an “AbbVie-friendly” U.S. 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 12 -

entry date. Op. 45-46. But it stated that “the package of global patent settlements” 

was not “an Actavis-like unlawful reverse-payment” since it merely “provided one 

early entry date for the European market and a different early entry date for the 

U.S. market—both permissible under Actavis.” Op. 45. Moreover, in the court’s 

view, the settlements’ effect “was to increase, not restrain competition by bringing 

competitors into the market when patents otherwise prohibited the competition.” 

Op. 46. As a result, “consumers won and the market for Humira (and its generics) 

became more competitive.” Op. 47. The court also opined that the settlements 

served a “broader” systemic interest in “encouraging patent litigants to settle 

worldwide patent disputes.” Op. 46. 

ARGUMENT

The district court’s analysis is flawed in two ways. First, the court seemingly

held that because the settlements allowed biosimilars to compete on a global basis 

before AbbVie’s patents expired, the agreements did not feature “Actavis-like” 

reverse payments and in fact “increase[d]” competition. See Op. 44-48. That is not 

the proper approach under Actavis, and indeed it resembles the scope-of-the-patent 

test, which the Supreme Court rejected. Instead, Actavis required the district court 

to ask whether plaintiffs sufficiently alleged that (1) AbbVie made a large payment 

to the biosimilars to induce them to stay off the domestic market, and (2) this 

payment cannot be explained or justified as something other than the parties’ desire 

to share U.S. monopoly profits. 570 U.S. at 153-54, 156-59; Lipitor, 868 F.3d at 255-

57. “Early” entry dates do not in and of themselves answer either question. 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 13 -

Second, the district court erred to the degree it dismissed the complaint 

based on the policy determination that doing so would encourage the settlement of

worldwide patent disputes. Actavis held that such a policy benefit does not save an 

unjustified reverse-payment settlement from antitrust condemnation. 570 U.S. at 

153-54. 

We note that these errors do not by themselves mandate reversal or 

demonstrate that the complaint states a plausible antitrust claim. Our purpose is 

simply to provide this Court with guidance on the legal principles underlying 

Actavis. We take no position on whether the complaint sufficiently pleads a viable 

claim. 

I. UNDER ACTAVIS, THE LEGALITY OF A PATENT SETTLEMENT TURNS ON THE 

PRESENCE OF A LARGE REVERSE PAYMENT AND THE REASONS FOR IT, NOT 

“EARLY” ENTRY

The district court erred by seemingly dismissing the complaint on the ground 

that the settlements allowed “early” competition before AbbVie’s patents expired. 

The proper inquiry under Actavis is (1) whether the parties settled with a reverse 

payment to eliminate the risk of earlier competition, and (2) whether the payment 

has a legitimate justification apart from the parties’ desire to share monopoly 

profits. 570 U.S. at 153-54, 156-59.

The court at first seemed to accept as true plaintiffs’ charge that “AbbVie 

paid the biosimilar manufacturers” by “allow[ing] the biosimilars to enter the 

European market” in exchange for “settl[ing] the infringement litigation with an 

AbbVie-friendly U.S. early entry date,” arrangements worth “hundreds of millions 

of dollars” to the biosimilars and “billions” in “lucrative monopoly time in the U.S.” 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 14 -

to AbbVie. Op. 44-45 & n.17.8 From there, however, the court went on to reason 

that the quid pro quo between AbbVie and the biosimilars was “not an Actavis-like 

unlawful reverse-payment” because the settlements merely allowed “early” 

competition in the U.S. and Europe—“both permissible under Actavis.” Op. 45. 

According to the court, such “early” competition meant that the settlements were 

procompetitive—and therefore justified—as a matter of law. “The effect of the 

payment was to increase, not restrain competition by bringing competitors into the 

market when patents otherwise prohibited the competition.” Op. 46. 

The district court’s focus on “early” entry evokes the very scope-of-the-patent 

test rejected in Actavis. Actavis held that, when the complaint plausibly alleges a 

large and unjustified reverse payment, settlements may violate the antitrust laws 

even if they allow “early” competition before the patents expire. 570 U.S. at 145-48, 

153-54. The Court recognized that settling with an “early” entry date is 

unproblematic only when it comes “without the patentee paying the challenger to 

stay out prior to that point.” Id. at 157-58; see supra pp. 5-7. But when the 

patentee offers “a share of its monopoly profits that would otherwise be lost in the 

competitive market,” even an “early” entry settlement “has the ‘potential for 

genuine adverse effects on competition.’” 570 U.S. at 153-54 (quoting FTC v. 

Indiana Fed’n of Dentists, 476 U.S. 447, 460-61 (1986)). 

 8 At the same time, the court observed that the complaint was marred by “potential 

inconsistencies” that “undermine[] the inference that th[e] European entry dates 

were worth all that much or were a bargaining chip in the U.S. settlements.” Op. 

45 n.17. The FTC takes no position on whether plaintiffs sufficiently pleaded the 

existence of a reverse payment despite these “potential inconsistencies.” 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 15 -

The district court therefore was incorrect that the alleged reverse-payment 

settlement “increase[d]” competition when it permitted generic entry before the 

patents expired, for it relied on the proposition that the “patents otherwise 

prohibited the competition.” Op. 46. But those untested patents “may or may not 

be valid, and may or may not be infringed.” Actavis, 570 U.S. at 147. Unless a 

reverse payment reflects “traditional settlement considerations,” it may amount to a 

monopolist’s purchase of an “exclusive right to sell its product, a right it already 

claims but would lose” if the generic had prevailed in the patent litigation. Id. at 

145-48, 153-54. This “payment in return for staying out of the market” guarantees 

that drug prices remain at “patentee-set,” non-competitive, monopoly levels, with 

the brand and its would-be generic challenger sharing the resulting profits. Id. at 

154. When this happens, “[t]he patentee and the challenger gain; the consumer 

loses.” Id. The antitrust laws forbid drug companies from agreeing to avoid 

competition and share the rewards of monopoly—even if the conspiracy ends before 

the patents expire.

Indeed, as explained above, the settlements at issue in Actavis provided for 

generic entry more than five years before patent expiry. The Court determined that 

the FTC’s complaint stated an antitrust claim because it alleged that the patentee 

had agreed “to compensate the generics for agreeing not to compete” prior to that 

date. Id. at 145, 158. Various lower courts have likewise held that allegations of 

reverse payments state a claim notwithstanding “early” entry when the complaint 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 16 -

plausibly alleges that early entry is accompanied by large and unjustified 

payments. See supra p. 7.

The Actavis analysis turns not on “early” entry but on whether brand and 

generic rivals agreed to share monopoly profits rather than compete. At the 

pleadings stage, all that Actavis requires are factual allegations sufficient to make 

it plausible that the patentee made a reverse payment that was large and 

unjustified. Lipitor, 868 F.3d at 257. A reverse payment exists when a settlement 

(1) provides the generic challenger with something of value that it could not have 

obtained had it won its litigation, Actavis, 570 U.S. at 147-48, and (2) enables the 

parties “to maintain supracompetitive prices to be shared among the patentee and 

the challenger rather than face what might have been a competitive market,” id. at 

157. Where both conditions are satisfied, the brand may be “using its monopoly 

profits to avoid the risk of patent invalidation or a finding of noninfringement”; that 

paid-for avoidance is “the very anticompetitive consequence that underlies the claim 

of antitrust unlawfulness.” Id. at 156-57. 

As part of this analysis, the adjudicator asks whether the complaint 

sufficiently alleges that the payment cannot be explained as reflecting “traditional 

settlement considerations,” such as “litigation expenses saved through the 

settlement” or “compensation for other services that the generic has promised to 

perform.” Id. at 156. Where such a justification exists, “there is not the same 

concern that a patentee is using its monopoly profits to avoid the risk of patent 

invalidation or a finding of noninfringement.” Id. 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 17 -

A settlement does not normally run afoul of the antitrust laws if it simply 

allows a competitor to enter the market before patent expiration, without a 

payment. This is true even if the settlement simultaneously resolves multiple 

patent litigations—whether on different drugs or in different jurisdictions. And the 

mere fact that, in a settlement of multiple litigations, one license may be worth 

more than the brand’s avoided litigation costs does not automatically mean the 

arrangement fails to reflect traditional settlement considerations. Cf. Br. of Pls.-

Appellants at 22-23. 

At the same time, however, where there are multiple settlements, it is not 

enough for a court to determine separately—as the district court did here—that 

each settlement appears to consist solely of an entry date. Rather, the court must

examine the economic substance of the alleged conduct as a whole to assess whether 

the plaintiffs have plausibly alleged a “payment in return for staying out the 

market.” 570 U.S. at 154. For instance, in AbbVie, the Third Circuit recently 

overturned a district court ruling that had dismissed a reverse-payment challenge 

to two pharmaceutical agreements on the grounds that each agreement appeared to 

simply allow “early” entry. Such an approach, the Third Circuit explained, 

inappropriately “elevates form over substance” and fails to consider whether the 

arrangement as a whole included an “unexplained large transfer of value” from a 

patentholder to a generic challenger. 2020 WL 5807873, at *19 (cleaned up). 

Applying the appropriate standard, the Third Circuit concluded that the FTC had 

plausibly alleged that the agreements were “linked,” with one agreement deferring 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 18 -

generic competition and the other serving as a transfer of monopoly profits in 

exchange for that deferral. Id.

Here, the district court did not fully consider whether the plaintiffs plausibly 

alleged that the European settlements served as a payment vehicle to induce the 

biosimilars to abandon their U.S. patent litigation and accept a deferred entry date. 

It may well be that the complaint alleges nothing more than entry dates in each 

settlement that reflect only an “approximation of the expected level of competition 

that would have obtained had the parties litigated.” Cipro, 348 P.3d at 865. But if 

plaintiffs have alleged—and ultimately can prove—that the agreements are linked 

and taken together include a payment for which the “basic reason” is “a desire to 

maintain and to share patent-generated monopoly profits [in the United States], 

then, in the absence of some other justification, the antitrust laws are likely to 

forbid the arrangement.” Actavis, 570 U.S. at 158. 

II. POLICIES FAVORING LITIGATION SETTLEMENT CANNOT MAKE LAWFUL A

LARGE AND UNJUSTIFIED REVERSE PAYMENT

The district court further opined that “uphold[ing] these agreements under 

antitrust review” would “encourag[e] patent litigants to settle worldwide patent 

disputes.” Op. 46-47. When the settlement is accompanied by a large and 

unjustified payment, Actavis directly rejected that concern as a basis for dismissal. 

The Court recognized a “general ... policy favoring the settlement of disputes,” but 

ruled that the policy “should not determine the result” in a reverse payment case. 

Actavis, 570 U.S. at 153-54. The antitrust laws forbid conspiracies to preserve a 

monopoly and carve up the resulting profits, even if they occur within the ambit of a 

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 19 -

patent litigation settlement. Id. The Commission has likewise observed that, 

although “settling litigation is typically favored under the law, it is not a trump 

card.” In re Impax Labs., Inc., No. 9373, 2019 WL 1552939, at *38 (F.T.C. Mar. 28, 

2019), appeal pending, No. 19-60394 (5th Cir.). The benefit of litigation settlement 

“does not immunize otherwise anticompetitive conduct.” Id.

Actavis recognized that this principle does not prevent parties from settling 

their patent disputes. They may settle with reverse payments that reflect 

traditional settlement considerations, such as avoided litigation costs or fair value 

for services. Actavis, 570 U.S. at 156. Or they may “settle in other ways, for 

example, by allowing the generic manufacturer to enter the patentee’s market prior 

to the patent’s expiration, without the patentee paying the challenger to stay out 

prior to that point.” Id. at 158. The Commission’s own studies of drug-patent 

settlements confirm that the vast majority of drug-patent settlements have featured 

no compensation from the brand to the generic in excess of litigation fees. Indeed, 

in the most recent year analyzed, the number of drug-patent settlements reached 

an all-time high.9 

 9 See Federal Trade Commission, Agreements Filed with the Federal Trade 

Commission under the Under the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003, Overview of Agreements Filed in FY 2016 (May 2019), 

https://www.ftc.gov/reports/agreements-filed-federal-trade-commission-undermedicare-prescription-drug-improvement-fy2016.

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
- 20 -

CONCLUSION

Regardless of its ruling on the ultimate merits, this Court should correct the 

foregoing legal errors committed by the district court. 

Respectfully submitted, 

IAN R. CONNER

Director

GAIL LEVINE

Deputy Director

MARKUS H. MEIER

Assistant Director 

BRADLEY S. ALBERT

KARA L. MONAHAN

Deputy Assistant Directors

TIMOTHY KAMAL-GRAYSON

Attorney 

Bureau of Competition

October 13, 2020

ALDEN F. ABBOTT

General Counsel

JOEL MARCUS

Deputy General Counsel

/s/ Bradley Grossman

BRADLEY DAX GROSSMAN

Attorney

Office of the General Counsel

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue NW

Washington, DC 20580

(202) 326-2994 

bgrossman@ftc.gov

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
CERTIFICATE OF COMPLIANCE

This brief complies with Federal Rules of Appellate Procedure 29(d) and 

32(a)(7) in that it contains 4,937 words, excluding the parts of the brief exempted by 

Rule 32(a)(7)(B)(iii).

This brief complies with the typeface requirements of Federal Rule of 

Appellate Procedure 32(a)(5) and the type style requirement of Circuit Rule 32(b)

because it has been prepared in a proportionally spaced typeface using Microsoft 

Word 2010 in 12-point New Century Schoolbook.

Dated: October 13, 2020 /s/ Bradley Grossman

Bradley Grossman

Attorney

Office of the General Counsel

Federal Trade Commission

600 Pennsylvania Avenue NW

Washington, DC 20580

(202) 326-2994 (telephone)

(202) 326-2477 (facsimile)

bgrossman@ftc.gov

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26
CERTIFICATE OF SERVICE

I hereby certify that on October 13, 2020, I filed and served the foregoing 

with the Court’s appellate CM/ECF system. I certify that all counsel of record are 

registered as ECF filers and that they will be served by the CM/ECF system.

Dated: October 13, 2020 /s/ Bradley Grossman

Bradley Grossman

Attorney

Office of the General Counsel

Federal Trade Commission

600 Pennsylvania Avenue NW

Washington, DC 20580

(202) 326-2994 (telephone)

(202) 326-2477 (facsimile)

bgrossman@ftc.gov

Case: 20-2402 Document: 61 Filed: 10/13/2020 Pages: 26