Nos. 15-1184, 15-1185, 15-1186, 15-1187, 15-1274, 15-1323, 15-1342

IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________________________________________________

IN RE EFFEXOR XR ANTITRUST LITIGATION

__________________________________________________

On Appeal from the United States District Court

for the District of New Jersey

Lead Case No. 3:11-cv-05479-PGS-LHG

___________________________________________________

BRIEF FOR AMICUS CURIAE FEDERAL TRADE COMMISSION

SUPPORTING PLAINTIFFS-APPELLANTS 

___________________________________________________

DEBORAH L. FEINSTEIN

Director

MARKUS H. MEIER

Acting Deputy Director

BRADLEY S. ALBERT

Deputy Assistant Director

ELIZABETH R. HILDER

JAMIE R. TOWEY

Attorneys

BUREAU OF COMPETITION

FEDERAL TRADE COMMISSION

JONATHAN E. NUECHTERLEIN

General Counsel

JOEL MARCUS

Director of Litigation

MICHELE ARINGTON

Assistant General Counsel

OFFICE OF GENERAL COUNSEL

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-3157
i

TABLE OF CONTENTS

PAGE

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

INTRODUCTION .....................................................................................................1

INTERESTS OF THE FEDERAL TRADE COMMISSION ...................................2

STATEMENT OF THE CASE..................................................................................3

1. Submission of Pharmaceutical Patent Settlements to the FTC.....................3

2. The Current Litigation and the Decision Below ...........................................6

ARGUMENT.............................................................................................................9

I. WYETH’S COMPLIANCE WITH THE FTC CONSENT ORDER CANNOT JUSTIFY 

AN ALLEGED REVERSE PAYMENT..................................................................9

II. THE FTC’S INACTION ON A FILED SETTLEMENT AGREEMENT HAS NO 

RELEVANCE TO THE ANTITRUST ANALYSIS.................................................11

CONCLUSION........................................................................................................13

COMBINED CERTIFICATIONS
ii

TABLE OF AUTHORITIES

CASES PAGE

Altria Group, Inc. v. Good, 555 U.S. 70 (2008)......................................................11

Chicago Bd. of Trade v. United States, 246 U.S. 231 (1918)..................................10

FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013)........................................ 1, 3, 8, 10, 11

FTC v. Cement Institute, 333 U.S. 683 (1948)..........................................................6

Heckler v. Chaney, 470 U.S. 821 (1985).................................................................12

King Drug Co. of Florence, Inc. v. Smithkline Beecham Corp., 791 F.3d 388 

(2015).................................................................................................. 1, 3, 7, 9, 10

Moog Indus., Inc. v. FTC, 355 U.S. 411 (1958)......................................................12

Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679 (1978)........................10

NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85 (1984).........................10

Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005)..........................2, 5

STATUTES

15 U.S.C. § 1..............................................................................................................7

15 U.S.C. § 2..............................................................................................................7

15 U.S.C. § 41 et seq..................................................................................................2

15 U.S.C. § 45(a) .......................................................................................................6

Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 

Pub. L. No. 108-173, 117 Stat. 2461 .......................................................... 2, 5, 11

RULES

Fed. R. App. P. 29(a) .................................................................................................3

LEGISLATIVE MATERIALS

S. Rep. No. 107-167 (2002).......................................................................................4
1

INTRODUCTION

The Supreme Court held in 2013 that a brand-name drug manufacturer’s 

“reverse payment” to a generic competitor to settle patent litigation can violate the 

antitrust laws. FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013). And this Court held 

earlier this year that such antitrust liability can arise not only from cash payments, 

but also from non-cash consideration such as the brand-name company’s promise 

not to launch an “authorized generic” version of its drug. King Drug Co. of 

Florence, Inc. v. Smithkline Beecham Corp., 791 F.3d 388 (2015). This case 

involves just such a promise. The district court nevertheless held that the 

complaint failed to state an antitrust claim, in part because the parties submitted 

their settlement proposal to the FTC and the FTC declined to file an objection in 

the underlying patent suit.

1

 

That was error. Neither the submission of a patent litigation settlement to 

the FTC nor the absence of subsequent FTC action has antitrust significance, 

whether the submission is made pursuant to an agency order, a statutory 

requirement, a court order, or voluntarily. If the district court’s ruling to the 

contrary were correct, resource limitations or other factors affecting agency 

enforcement discretion could perversely immunize anticompetitive agreements 

from antitrust scrutiny. Indeed, the FTC reviews almost 200 pharmaceutical 

 1 Memorandum Opinion (“Op.”) at 42-43, In re Effexor XR Antitrust Litig., No. 

3:11-cv-05479 (D.N.J. Oct. 6, 2014), ECF No. 353.
2

agreement filings annually, and it cannot possibly identify and investigate all 

settlements that merit further inquiry on the timeline of private-party litigation. 

This Court should reject reliance on FTC inaction as a basis for insulating 

pharmaceutical manufacturers from antitrust liability.

2

INTERESTS OF THE FEDERAL TRADE COMMISSION

The Federal Trade Commission is an independent agency charged with 

promoting a competitive marketplace and protecting consumer interests. See 15 

U.S.C. § 41 et seq. As exemplified by the Actavis litigation, the Commission also 

exercises primary responsibility over federal antitrust enforcement in the 

pharmaceutical industry. For more than a decade, the Commission has used its 

law-enforcement authority to challenge patent settlements of the type at issue 

here.3

 And since January 2004, it has reviewed and reported on drug-patent 

settlements, which drug companies are now required to file with the Commission.4

 

 2 This brief addresses only the district court’s erroneous analysis of that issue. Our 

silence on the remaining issues is not an endorsement of any alternative basis for 

the district court’s ruling.

3 See, e.g., Actavis, 133 S. Ct. 2223; Schering-Plough Corp. v. FTC, 402 F.3d 1056 

(11th Cir. 2005) (overruled in relevant part in Actavis); Plaintiff Federal Trade 

Commission’s First Amended Complaint for Injunctive Relief, FTC v. Cephalon, 

Inc., No. 2:08-cv-02141 (E.D. Pa. Aug. 12, 2009), ECF No. 40. 

4 See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 

Pub. L. No. 108-173, §§ 1111-1118, 117 Stat. 2461-64 (codified at 21 U.S.C. § 

355 note).
3

The Commission has submitted amicus briefs in a number of proceedings 

concerning the legality of reverse-payment agreements,

5 including a brief in the 

district court proceedings below. Pursuant to Fed. R. App. P. 29(a), the 

Commission respectfully submits this brief.

STATEMENT OF THE CASE

1. Submission of Pharmaceutical Patent Settlements to the FTC

Reverse-payment settlements arise in the context of the unique regulatory 

framework established under the Hatch-Waxman Act. See generally King Drug, 

791 F.3d at 394-96. As the Supreme Court held in 2013, these settlements can 

raise significant anticompetitive concerns. See Actavis, 133 S. Ct. 2223; see also 

King Drug, 791 F.3d 388. And for more than a dozen years before Actavis was 

decided, the FTC investigated and challenged reverse-payment settlements with 

the twin goals of obtaining relief for consumers and deterring future 

anticompetitive conduct.

In 2002, the FTC partially resolved its first reverse-payment settlement 

challenge by entering into a consent order with defendant-appellee Wyeth (then 

called American Home Products).

6

 At that time, pharmaceutical companies were 

 5 E.g., Brief of the Federal Trade Commission as Amicus Curiae in Support of

Plaintiffs-Appellants, King Drug Co. of Florence, Inc. v. Smithkline Beecham 

Corp., No. 14-1243 (3d Cir. Apr. 28, 2014). 

6 Decision and Order, In re Schering-Plough Corp.,Upsher-Smith Labs., Inc., & 

Am. Home Prods. Corp., D. 9297 (FTC Apr. 2, 2002) (“Consent Order”), 
4

not yet required to submit their patent settlements to the federal antitrust agencies, 

which made it difficult for the FTC to learn of potentially anticompetitive deals. 

The 2002 consent order required Wyeth to submit for FTC review certain

prospective settlement agreements resolving pharmaceutical patent litigation. If 

Wyeth submitted an agreement to the FTC with at least 30 days’ notice, the FTC 

did not raise an objection, and Wyeth obtained a stipulated permanent injunction, 

then Wyeth could enter the settlement without violating the consent order. See

Consent Order, ¶ II. Of course, the settlement could still be unlawful under 

substantive antitrust law even if Wyeth complied with its procedural obligations 

under the consent order.

About the same time as the Wyeth consent order, Congress became 

concerned about “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. 107-167 at 4 

(2002). In 2003, Congress amended the law to require parties to file their 

 

https://www.ftc.gov/sites/default/files/documents/cases/2002/04/scheringplough_d

o.htm (cited at Op. 20 n.12). The FTC’s administrative complaint alleged that, in 

exchange for substantial cash payments, American Home Products had unlawfully 

agreed with Schering-Plough Corporation to abandon a patent challenge and 

refrain from selling its generic version of Schering’s drug for several years. See

Complaint, In re Schering-Plough Corp.,Upsher-Smith Labs, Inc., & Am. Home 

Prods. Corp., D. 9297 (FTC Mar. 30, 2001), 

https://www.ftc.gov/sites/default/files/documents/cases/2001/04/scheringpart3cmp.

pdf.
5

pharmaceutical patent litigation settlements (and any related agreements) with the 

FTC and the Department of Justice. See Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (“MMA”), Pub. L. No. 108-173, §§ 

1111-1118, 117 Stat. 2461-64 (codified at 21 U.S.C. § 355 note). The MMA 

solved the government’s previous information deficit and facilitated law 

enforcement by providing access to all reverse-payment deals. But Congress

placed no duty on the FTC or the Department of Justice to take action on a 

submitted settlement proposal. To the contrary, the MMA provides that “any 

failure of the [agencies] to take action” concerning a filed agreement “shall not at 

any time bar any proceeding or any action with respect to” any such agreement. 

Id. at § 1117, 117 Stat. 2463.

In March 2005, the Eleventh Circuit held that reverse payments do not 

trigger antitrust scrutiny unless they restrained competition beyond the “scope of 

the patent”—i.e., unless the generic agreed to stay out of the market after the patent 

had expired or the patent was obtained by fraud. Schering-Plough Corp. v. FTC, 

402 F.3d 1056 (11th Cir. 2005). This scope-of-the-patent test endured in the lower 

courts for eight years and, until it was rejected in Actavis, virtually immunized 

reverse-payment agreements from antitrust challenge.

After the Eleventh Circuit’s ruling, Wyeth and Teva reached the settlement 

agreement at issue here. In accordance with the 2002 FTC consent order, Wyeth 
6

notified the court hearing the patent case of the order’s requirements. The court 

issued a scheduling order that set forth deadlines for the parties’ submission of 

their agreements to the FTC and for the FTC’s filing of objections to the 

agreements. See Op. 20. In response, FTC staff issued a letter to Wyeth stating 

that, given the agency’s understanding that Wyeth and Teva did not intend “to 

independently raise with the Court the competitive implications of their proposed 

settlement agreement,”7 it had decided not to object to the agreement at that time. 

See Op. 20-21 (quoting FTC 2005 staff letter to Wyeth’s counsel). Just as 

Congress had provided in the MMA context, the FTC cautioned that its inaction 

should not be “construed as a determination that the proposed settlement 

agreement does not violate Section 5 of the FTC Act.”8 Op. 21 (quoting FTC staff 

letter).

2. The Current Litigation and the Decision Below

Plaintiffs-appellants are direct purchasers of Wyeth’s product Effexor XR, 

 7 In some instances, drug companies settling patent litigation have asked the court 

to enter stipulated findings that their settlement agreement is procompetitive, in an 

effort to shield the agreement from later antitrust scrutiny. See, e.g., Stipulation 

and Order of Dismissal at ¶ 6, Smithkline Beecham Corp. v. Teva Pharm. USA Inc., 

No. 2:02-cv-3779 (D.N.J. Apr. 6, 2005), ECF No. 89 (“As a result of the 

settlement there will be early procompetitive generic competition....”).

8 Section 5 prohibits “[u]nfair methods of competition in or affecting commerce.” 

15 U.S.C. § 45(a). See generally FTC v. Cement Institute, 333 U.S. 683, 689-93 

(1948) (Sherman Act violations redressed as violations of Section 5).
7

an extended release antidepressant.9

 They allege that, to induce Teva to abandon 

its patent challenge and refrain from selling generic Effexor XR for two years,

Wyeth promised not to market an authorized generic version of Effexor XR during 

the 180-day period in which (under the Hatch-Waxman Act) Teva would be the 

exclusive generic manufacturer of the drug.10 Plaintiffs allege that this agreement

is a reverse-payment settlement that violates Sections 1 and 2 of the Sherman Act, 

15 U.S.C. §§ 1 & 2. Wyeth and Teva filed motions to dismiss. The FTC

submitted an amicus brief in August 2013 in connection with the district court’s 

consideration of those motions.

11 As that brief explained, and as this Court later 

held in King Drug, a brand-name manufacturer’s promise not to launch an 

authorized generic during the first generic applicant’s exclusivity period can play 

the same unlawful role as the reverse payments at issue in Actavis.

12

In October 2014, the district court dismissed plaintiffs’ reverse-payment 

claims. It agreed in principle that reverse payments can take the form of non-cash 

consideration, such as an agreement not to compete with an authorized generic. 

 9 For simplicity’s sake, this brief addresses the claims of the direct purchaser class 

plaintiffs.

10 See Direct Purchaser Class Plaintiffs’ Second Amended Consolidated Class 

Action Complaint and Jury Demand at ¶¶ 270, 276-77, In re Effexor XR Antitrust 

Litig., No. 3:11-cv-05479 (D.N.J. Oct. 23, 2013), ECF No. 287.

11 Federal Trade Commission Brief as Amicus Curiae, In re Effexor XR Antitrust 

Litig., No. 3:11-cv-05479 (D.N.J. Aug. 14, 2013), ECF No. 236-2.

12 See id. at 10-13; King Drug, 791 F.3d at 403-10. 
8

But the court held that the plaintiffs had not stated a cognizable reverse-payment 

claim under Actavis because they had “fail[ed] to provide appropriate evidence for 

the Court to determine the value of the payment.” Op. 40.

The district court then turned to the issues addressed in this brief. See supra

note 2. It first held that, because Wyeth had submitted the proposed settlement to 

the FTC in 2005, the settlement could not constitute an “unexplained” payment 

subject to scrutiny under Actavis. Op. 42; see id. at 31 (citing Actavis’s reference

to an “unexplained large reverse payment,” 133 S. Ct. at 2236). The court

reasoned that, under Actavis, “a justification [for the payment] can be seen in the

intent of the parties in settling.” Op. 42. And it found that “any alleged antitrust 

intent” here was “negated” by “the parties’ willingness to submit those 

agreement[s] for review” by the FTC. Id. The court did not explain how actions 

required by the FTC’s 2002 consent order—notice to the FTC and an opportunity 

for the FTC to file an objection with the patent court (see id. at 20 n.12)—could 

demonstrate Wyeth and Teva’s intent in agreeing to the alleged reverse payment, 

let alone shield an allegedly anticompetitive deal from antitrust scrutiny.

The court further relied heavily on the FTC’s decision not to object. The 

court faulted the FTC for declining to oppose the settlement in the patent litigation

while reserving its right to take “such further action as the public interest may 

require.” Id. at 21 (quoting FTC 2005 staff letter to Wyeth’s counsel). “When a 
9

governmental agency receives an invitation from the Court to intercede in a matter 

by way of an Order,” the court stated, “that agency should respond appropriately, 

not simply reserve that right for the future.” Id. at 43 (emphasis in original). In the 

court’s view, this “lackluster response,” given “the comprehensive review 

suggested by the judiciary,” was “sufficient justification that the agreement 

between Wyeth and Teva did not constitute an unexplained payment.” Id.

ARGUMENT

This brief addresses two related errors in the district court’s opinion. First, 

the court mistakenly relied on the parties’ advance submission of their settlement 

agreement to the FTC as evidence of a lack of intent to violate the antitrust laws. 

Second, the court erroneously regarded the agency’s decision not to object at that 

time as a basis for insulating the settlement agreement from antitrust review. Both 

errors reflect a serious misunderstanding of controlling law.

I. WYETH’S COMPLIANCE WITH THE FTC CONSENT ORDER CANNOT 

JUSTIFY AN ALLEGED REVERSE PAYMENT.

As this Court has recognized, a brand-name drug manufacturer’s promise 

not to market an authorized generic “transfers the profits the patentee would have 

made from its authorized generic to the settling generic—plus potentially more, in 

the form of higher prices, because there will now be a generic monopoly instead of 

a generic duopoly.” King Drug, 791 F.3d at 405. Once an antitrust plaintiff shows 

such a large transfer, “the burden then shifts to the defendant to show ‘that 
10

legitimate justifications are present, thereby explaining the presence of the 

challenged term.’” Id. at 412 (quoting Actavis, 133 S. Ct. at 2236). 

Contrary to the district court’s ruling, Wyeth and Teva’s compliance with 

the notice requirements of the FTC’s 2002 consent order cannot negate any 

element of antitrust liability. Although the court found that this submission

“negated” “any alleged antitrust intent,” Op. 42, a party’s “good intention” cannot

“save an otherwise objectionable [restraint of trade].” Chicago Bd. of Trade v. 

United States, 246 U.S. 231, 238 (1918). The rule-of-reason inquiry “is confined 

to a consideration of impact on competitive conditions,” Nat’l Soc’y of Prof’l

Eng’rs v. United States, 435 U.S. 679, 690 (1978), and “good motives will not 

validate an otherwise anticompetitive practice,” NCAA v. Bd. of Regents of the 

Univ. of Okla., 468 U.S. 85, 101 n.23 (1984).

Actavis affirms these fundamental principles. The Court there held that the 

justification proffered by the defendants must “explain[] the presence of the 

challenged [reverse payment] term.” 133 S. Ct. at 2236. It identified two 

justifications for reverse payments—“litigation expenses saved through the 

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

perform”—and observed that “there may be others.” Id. Both of the cited 

justifications explain the payment and bear directly on the competitive effects of 

the conduct. Both demonstrate that the parties are not agreeing to maintain and 
11

share patent-generated monopoly profits by eliminating the risk of competition. 

See id. at 2236-37.

In contrast, Wyeth’s compliance with the 2002 consent order reveals nothing 

about the likely competitive effects of this agreement. It does not “explain[] the 

presence of the challenged [reverse payment] term.” 133 S. Ct. 2236. Nor does it 

demonstrate that Wyeth is not sharing monopoly profits with a potential rival. In 

short, Wyeth’s compliance with the consent order cannot serve as a legitimate 

justification for the alleged reverse payment.

II. THE FTC’S INACTION ON A FILED SETTLEMENT AGREEMENT HAS NO 

RELEVANCE TO THE ANTITRUST ANALYSIS.

The district court also erred in reading antitrust significance into the FTC’s 

decision not to submit objections under the consent order. It is well established 

that government inaction does not indicate agency approval. See, e.g., Altria 

Group, Inc. v. Good, 555 U.S. 70, 89-90 (2008). Indeed, Congress reaffirmed that 

basic principle when it enacted the MMA in 2003, making clear that “any failure of 

the [FTC] to take action” against a filed settlement agreement “shall not at any 

time bar any proceeding or any action with respect to” any such agreement. MMA

§ 1117, 117 Stat. 2463. Here, the FTC’s 2002 consent order against Wyeth 

likewise created no immunity from antitrust law for agreements falling under its 

30-day advance review provisions. See supra pp. 3-5. Whether review occurs 

before or after an agreement is executed, lack of action by the FTC does not serve 
12

to validate the agreement or insulate it from the same antitrust principles applicable 

to all other agreements. 

It is for good reason that courts impute no legal significance to agency 

inaction. An agency decision whether to act in a particular matter or at a particular 

time “often involves a complicated balancing” of factors: the agency must “assess 

whether a violation has occurred,” “whether agency resources are best spent” on 

that matter, whether that particular action “best fits the agency’s overall policies, 

and indeed whether the agency has enough resources to undertake the action at 

all.” Heckler v. Chaney, 470 U.S. 821, 831 (1985). Given those concerns, “the 

Commission alone is empowered to develop that enforcement policy best 

calculated to achieve” its statutory mission and “to allocate its available funds and 

personnel in such a way as to execute its policy efficiently and economically.” 

Moog Indus., Inc. v. FTC, 355 U.S. 411, 413 (1958) (refusing to stay an FTC order 

against one firm until competing firms could be similarly restrained).

The decision below subverted these principles. In effect, the district court 

took a notice mechanism designed to give the FTC information and flexibility in its 

review of Wyeth’s compliance and turned it into an escape hatch for defendants to 

evade antitrust scrutiny. That decision is particularly indefensible given the FTC’s 

express statement in its response to Wyeth that its inaction should not be viewed as 

a determination that the settlement passed antitrust muster. See Op. 21 (quoting 
13

FTC’s 2005 letter to Wyeth’s counsel). In short, the court erred when it treated the 

FTC’s response as justification for potentially anticompetitive behavior under 

Actavis.

CONCLUSION

The Court should reverse the district court’s holding that Wyeth’s 

compliance with the FTC consent order, and the FTC’s subsequent inaction, 

established that the challenged reverse payment was justified.

Respectfully submitted,

DEBORAH L. FEINSTEIN

Director

MARKUS H. MEIER

Assistant Director

BRADLEY S. ALBERT

Deputy Assistant Director

ELIZABETH R. HILDER

JAMIE R. TOWEY

Attorneys

BUREAU OF COMPETITION

FEDERAL TRADE COMMISSION

JONATHAN E. NUECHTERLEIN

General Counsel

JOEL MARCUS

Director of Litigation

s/ Michele Arington

MICHELE ARINGTON

Assistant General Counsel

OFFICE OF GENERAL COUNSEL

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-3157

November 17, 2015
1

COMBINED CERTIFICATIONS

1. This brief complies with the type-volume limitation set forth in Fed. R. App. 

32 (a)(7)(B), in that it contains 3,049 words, excluding the parts of the brief 

exempted by Fed. R. App. P. 32(a)(7)(B)(iii), and complies with the 

typeface requirements of Fed. R. App. P. 32(a)(5) and the type style 

requirements of Fed. R. App. P. 32(a)(6), because it has been prepared in a 

proportionally spaced typeface using Microsoft Word 2010 in Times New 

Roman 14-point font.

2. I filed the electronic PDF version of this brief with the Court via the 

CM/ECF system. The docket for this proceeding indicates that all 

participants in the case are registered CM/ECF users, and service will be 

accomplished by the CM/ECF system.

3. The text of the electronic PDF version of this brief is identical to the text of 

the paper copies being sent to this Court.

4. I ran a virus check on the electronic version of this brief using used 

Symantec Endpoint Protection version 12.1.4112.4156, and it detected no 

virus. 

5. Because this brief is filed on behalf of an administrative agency of the 

United States, there is no bar membership requirement.

November 17, 2015 s/ Michele Arington 

MICHELE ARINGTON