Fed. Trade Comm'n v. Abbvie Inc.

976 F.3d 327

FEDERAL TRADE COMMISSION, Appellant

v.ABBVIE INC; Abbott Laboratories; Unimed Pharmaceuticals, LLC; Besins Healthcare, Inc. ; *Teva Pharmaceuticals USA, Inc

(*Dismissed Pursuant to Court's 3/12/19 Order.)

Federal Trade Commission,

v.AbbVie Inc.; Abbott Laboratories; Unimed Pharmaceuticals, LLC; Besins Healthcare, Inc. ; *Teva Pharmaceuticals USA, Inc.

AbbVie Inc.; Abbott Laboratories; Unimed Pharmaceuticals, LLC, Appellants

(*Dismissed Pursuant to Court's 3/12/19 Order.)

Federal Trade Commission,

v.AbbVie Inc.; Abbott Laboratories; Unimed Pharmaceuticals, LLC; Besins Healthcare, Inc. ; *Teva Pharmaceuticals USA, Inc.

Besins Healthcare, Inc., Appellant

(*Dismissed Pursuant to Court's 3/12/19 Order.)

No. 18-2621

No. 18-2748

No. 18-2758

United States Court of Appeals, Third Circuit.

Argued on January 15, 2020

Filed September 30, 2020

Mark S. Hegedus, Federal Trade Commission, MS-582, 600 Pennsylvania Avenue, N.W., Washington, DC 20580, Matthew M. Hoffman [Argued], Joel R. Marcus, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, DC 20580, Attorneys for Federal Trade Commission

Brittany Amadi, Catherine M.A. Carroll, Leon B. Greenfield, Seth P. Waxman [Argued], WilmerHale, 1875 Pennsylvania Avenue, N.W., Washington, DC 20006, Elaine J. Goldenberg, Munger Tolles & Olson, 1155 F Street, N.W., 7th Floor, Washington, DC 20004, Adam R. Lawton, Stuart N. Senator, Jeffrey I. Weinberger, Munger Tolles & Olson, 350 South Grand Avenue, 50th Floor, Los Angeles, CA 90071, William F. Lee, WilmerHale, 60 State Street, Boston, MA 02109, Paul H. Saint-Antoine, John S. Yi, Faegre Drinker Biddle & Reath, One Logan Square, Suite 2000, Philadelphia, PA 19103, Attorneys for AbbVie Inc, Abbott Laboratories, and Unimed Pharmaceuticals LLC

Melinda F. Levitt, Gregory E. Neppl [Argued], Foley & Lardner, 3000 K Street, N.W., Suite 600, Washington, DC 20007, Paul H. Saint-Antoine, John S. Yi, Faegre Drinker Biddle & Reath, One Logan Square, Suite 2000, Philadelphia, PA 19103, Attorneys for Besins Healthcare, Inc.

William A. Rivera, AARP Foundation Litigation, B4-230, 601 E Street, N.W., Washington, DC 20049, Attorney for Amici AARP and AARP Foundation

Ilana H. Eisenstein, DLA Piper, 1650 Market Street, One Liberty Place, Suite 5000, Philadelphia, PA 19103, Attorney for Amicus Chamber of Commerce of the United States of America

Bradford J. Badke, Sidley Austin, 787 Seventh Avenue, New York, NY 10019, Attorney for Amicus Amgen Inc

Andrew D. Lazerow, Covington & Burling, 850 10th Street, N.W., One City Center, Washington, DC 20001, Attorney for Amicus Pharmaceutical Research and Manufacturers of America

Richard M. Brunell, Hilliard & Shadowen, 1135 West 6th Street, Suite 125, Austin, TX 78703, Attorney for Amici American Antitrust Institute, Public Citizen Inc, and Public Knowledge

Before: HARDIMAN, PORTER and PHIPPS, Circuit Judges.

OPINION OF THE COURT

HARDIMAN, Circuit Judge.

TABLE OF CONTENTS

I. FACTUAL BACKGROUND...338

A. FDA Approval under the Hatch-Waxman Act...338

B. Patent disputes under the Hatch-Waxman Act...339

C. Therapeutic equivalence ratings...340

D. Hypogonadism and testosterone replacement therapies...340

E. AndroGel...341

F. The ’894 patent ’s prosecution history...341

G. AndroGel's competitors...342

H. The lawsuits against Teva and Perrigo...342

I. The settlements with Perrigo and Teva...344

J. Teva and Perrigo's generic versions of AndroGel...345

II. PROCEDURAL HISTORY...345

III. JURISDICTION...346

IV. LIABILITY...351

A. The District Court erred by rejecting the reverse-payment theory...351

B. The District Court erred in concluding AbbVie and Besins's litigation against Teva was a sham; it did not err in concluding the Perrigo litigation was a sham...359

C. The District Court did not err in concluding AbbVie and Besins had monopoly power in the relevant market...371

V. REMEDIES...374

A. The District Court erred in ordering disgorgement...374

B. The District Court did not abuse its discretion in denying injunctive relief...379

C. Remand on the reverse-payment theory is not futile...381

This appeal involves a patented drug called AndroGel. A blockbuster testosterone replacement therapy that generated billions of dollars in sales, AndroGel caught the attention of the Federal Trade Commission. The FTC sued the owners of an AndroGel patent—AbbVie, Inc., Abbott Laboratories, Unimed Pharmaceuticals LLC, and Besins Healthcare, Inc.—under Section 13(b) of the Federal Trade Commission Act in the United States District Court for the Eastern District of Pennsylvania. The FTC alleged that Defendants filed sham patent infringement suits against Teva Pharmaceuticals USA, Inc. and Perrigo Company, and that AbbVie, Abbott, and Unimed entered into an anticompetitive reverse-payment agreement with Teva. The FTC accused Defendants of trying to monopolize and restrain trade over AndroGel.

The District Court dismissed the FTC's claims to the extent they relied on a reverse-payment theory but found Defendants liable for monopolization on the sham-litigation theory. The Court ordered Defendants to disgorge $448 million in ill-gotten profits but denied the FTC's request for an injunction. The parties cross-appeal.

We hold the District Court erred by rejecting the reverse-payment theory and in concluding Defendants’ litigation against Teva was a sham. The Court did not err, however, in concluding the Perrigo litigation was a sham and that Defendants had monopoly power in the relevant market. Yet the FTC has not shown the monopolization entitles it to any remedy. The Court did not abuse its discretion in denying injunctive relief; and the Court erred by ordering disgorgement because that remedy is unavailable under Section 13(b) of the FTC Act. Accordingly, we will reinstate the FTC's dismissed claims and remand for further proceedings consistent with this opinion. We will also affirm in part and reverse in part the Court's order adjudging Defendants liable for monopolization. Finally, we will affirm the Court's order denying injunctive relief and reverse the Court's order requiring Defendants to disgorge $448 million.

I. FACTUAL BACKGROUND

A. FDA Approval under the Hatch-Waxman Act

The Food, Drug, and Cosmetic Act (the FDC Act), 21 U.S.C. § 301 et seq. , empowers the Food and Drug Administration (FDA) to regulate the manufacture and sale of drugs in the United States. Before a pharmaceutical company can market a drug, it must obtain FDA approval. Id. § 355(a). Under the FDC Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act), 21 U.S.C. § 355 and 35 U.S.C. § 271, a company can apply for FDA approval in one of three ways:

1. Section 505(b)(1) New Drug Application (NDA) . This is a "full-length" application. FTC v. AbbVie Inc. , 329 F. Supp. 3d 98, 107 (E.D. Pa. 2018). The "gauntlet of procedures" associated with it is "long, comprehensive, and costly." In re Wellbutrin XL Antitrust Litig. Indirect Purchaser Class , 868 F.3d 132, 143 (3d Cir. 2017) (citation omitted). It includes "full reports of investigations" into whether the drug is safe and effective, a "full list of ... [the drug's] components," a "full description of the methods used in ... the manufacture, processing, and packing" of the drug, samples of the drug, and specimens of the labeling the company proposes to use. 21 U.S.C. § 355(b)(1). A company must also list any relevant patents. See Wellbutrin , 868 F.3d at 144 (citation omitted). We refer to drugs approved through this process as "brand-name" drugs.

2. Section 505(j) Abbreviated New Drug Application (ANDA) . This streamlined application is appropriate for a company seeking to market a generic version of a brand-name drug. The company need not produce its own safety and efficacy data. 21 U.S.C. § 355(j)(2)(A)(vi). But it must show that the generic drug is "the same" as the brand-name drug in certain relevant respects. Id. § 355(j)(2)(A). It also must "assure the FDA that its proposed generic drug will not infringe the brand's patents." Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S , 566 U.S. 399, 406, 132 S.Ct. 1670, 182 L.Ed.2d 678 (2012). It can do so by certifying that the manufacture, use, or sale of the generic will not infringe patents relating to the brand-name drug, or that those patents are invalid. 21 U.S.C. § 355 (j)(2)(A)(vii)(IV). This certification is known as a "paragraph IV notice." AbbVie , 329 F. Supp. 3d at 108.

The first company to seek FDA approval in this way enjoys "a period of 180 days of exclusivity," during which "no other generic can compete with the brand-name drug." FTC v. Actavis, Inc. , 570 U.S. 136, 143–44, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013) (citing 21 U.S.C. § 355 (j)(5)(B)(iv) ). "[T]his 180-day period ... can prove valuable, possibly worth several hundred million dollars." Id. at 144, 133 S.Ct. 2223 (internal quotation marks and citation omitted). One exception is that during the 180-day exclusivity period, the brand-name company can produce a generic version of its own drug or license a third party to do so. See Mylan Pharm., Inc. v. FDA , 454 F.3d 270, 276–77 (4th Cir. 2006). These "authorized generics" can decrease the value an applicant receives from the 180-day exclusivity period to the extent they share the generic drug market and depress prices. See id. at 273.

3. Section 505(b)(2) New Drug Application (hybrid NDA) . This application is appropriate for a company seeking to modify another company's brand-name drug. For example, a company might seek FDA approval of "a new indication or new dosage form." 21 C.F.R. § 314.54(a). This application is like an ANDA because the company need not produce all safety and efficacy data about the drug and because it must assure the FDA that its generic drug will not infringe the brand's patents. See 21 U.S.C. § 355(b)(2)(A)(iv). But it differs from an ANDA because the company must produce some data, including whatever "information [is] needed to support the modification(s)." 21 C.F.R. § 314.54(a).

The latter...