In Re K-Dur Antitrust Litigation
686 F.3d 197
| 3rd Cir. | 2012Background
- This appeal addresses antitrust implications of reverse payments in Hatch-Waxman settlements involving Schering's K-Dur 20 and generic challengers Upsher and ESI.
- District Court certified a class of 44 wholesalers/retailers who bought K-Dur directly from Schering and later generic K-Dur.
- K-Dur is a brand-name sustained-release potassium chloride; the patent at issue is the ‘743 coating patent.
- Settlement with Upsher provided delay of entry until 2001 in exchange for $60 million and other licenses; settlement with ESI provided a royalty/payment structure with potential up to $10 million depending on timing.
- FTC filed suit alleging reverse payments unreasonably restrained commerce; initial ALJ dismissed, FTC reversed, and later courts divided on legality of reverse payments.
- Court adopts a quick-look rule of reason, holding reverse payments prima facie evidence of restraint, and remands for further proceedings; also affirms class certification on predominance and adequacy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are reverse payments in Hatch-Waxman settlements antitrust restraints? | Reverse payments suggest anticompetitive intent and restraint. | Strength of patent bounds and scope of settlement may justify restraint. | Reverse payments require quick-look rule of reason; prima facie evidence of restraint; possible procompetitive rebuttal. |
| Is the district court's class certification proper under Rule 23(b)(3)? | Common evidence shows antitrust impact to all class members. | Pricing variations and timing differences require individualized proof. | Class certification affirmed; common proof of impact viable; minor variations handled at damages stage. |
| Should the court apply the scope-of-the-patent test to reverse payments? | Scope-of-the-patent test unduly limits antitrust scrutiny. | Scope-of-the-patent test appropriately limits review to patent scope. | Rejected; adopted quick-look rule of reason instead. |
| Do intra-class conflicts defeat adequacy of representation? | Some class members benefited from lack of generic competition, creating potential conflicts. | All class members share common interest in overcharge damages; no fundamental conflict. | No fundamental intra-class conflict; adequacy maintained. |
Key Cases Cited
- Andrx Pharms., Inc. v. Biovail Corp. Int’l, 256 F.3d 799 (D.C. Cir. 2001) (reverse payments can signal illegal market allocation; prima facie evidence of anticompetitive intent)
- In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187 (2d Cir. 2006) (Tamoxifen scope-of-patent approach; settlement analyzed within patent framework)
- Valley Drug Co. v. Geneva Pharms., Inc., 344 F.3d 1294 (11th Cir. 2003) (scope of the patent approach; emphasis on settlements within patent protections)
- Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005) (FTC reversal of ALJ; reverse payments largely viewed through patent protections)
- In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323 (Fed. Cir. 2008) (scope-of-the-petent test; prohibits consideration of patent validity absent fraud/sham litigation)
- In re Cardizem CD Antitrust Litig., 332 F.3d 896 (6th Cir. 2003) (similar Andrx line; bottlenecking and market-sharing concerns in reverse payments)