Calif. Pay-For-Delay Law Lacks Nuance

Law360, July 17, 2020

California Assembly Bill 824 (A.B. 824), passed in late 2019, made the state the first to treat reverse payment settlements between pharmaceutical companies as presumptively anticompetitive. The effect of this law on the evaluation of pharmaceutical market definition in antitrust litigation, as well as its tensions with existing precedent, are discussed in “Calif. Pay-For-Delay Law Lacks Nuance,” a Law360 article written by Managing Principal Stephen Fink and affiliate Anupam B. Jena, a physician at Massachusetts General Hospital and Ruth L. Newhouse Associate Professor of Health Care Policy at Harvard Medical School.

Mr. Fink and Professor Jena detail how the California bill breaks from legal antitrust precedent established by Federal Trade Commission (FTC) policies and federal court cases – in particular, the US Supreme Court’s ruling in FTC v. Actavis, which established that a rule-of-reason analysis be used rather than assuming that “reverse payment settlement agreements are presumptively unlawful.” They also explain how listed clinical substitute drugs that are often compared head-to-head in clinical trials are excluded from the relevant antitrust market by A.B. 824, which renders the market definition and market power analyses common in a rule-of-reason approach obsolete and inadmissible in pharmaceutical antitrust litigation. Finally, Mr. Fink and Professor Jena discuss whether the law improperly subjects some manufacturers to antitrust rulings despite significant competition, and consider the legislation’s potential effects on social welfare and pharmaceutical innovation.

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Fink S, Jena A