Healthcare Law Update: February 2018

By Neal N. Beaton and John R. Dierking

The Federal Trade Commission (FTC) has announced this year's revisions to the thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), which will be applicable to transactions closing on or after Feb. 28, 2018. The FTC is required to revise the HSR Act thresholds annually based on changes in the U.S. gross national product, resulting in an increase of roughly 4.45 percent over last year. The size-of-transaction threshold will now be met if, as a result of the transaction, the buyer will hold voting securities, assets and/or non-corporate interests of the seller valued in excess of $84.4 million; and the size-of-person threshold will now usually be met if one party to the transaction has total assets or net sales of $168.8 million or more and the other party to the transaction has total assets or net sales of $16.9 million or more.

If the minimum jurisdictional thresholds are met and there are no applicable exemptions, the HSR Act requires parties intending to merge, purchase or sell voting securities, non-corporate interests or assets, or engage in certain other types of acquisition transactions, to provide information and stay the consummation of a covered transaction for the waiting period specified by law. In particular, the grant of an exclusive intellectual property (IP) license (defined as "all commercially significant rights") is the transfer of an asset to the licensee that can trigger the HSR Act requirements. In order for the transaction to be treated as an acquisition, the license must be exclusive — even against the grantor. Moreover, partial or limited exclusivity, such as license grants for exclusive geographic territories or for specific fields of use or jurisdictions, may be considered an acquisition of an asset for HSR Act purposes.

By Nathan A. Adams IV

In In re: Lipitor Antitrust Litigation RP Healthcare, Inc., No. 14-4632, 2018 WL 266751 (3d Cir. Jan. 3, 2018), the court determined that the district court had diversity jurisdiction over the plaintiff's Cartwright Act (California's antitrust statute) claim, but affirmed dismissal of the claim because a reverse settlement is not a per se violation of the act. The district court initially declined to send the case back to state court from whence it was removed based on an erroneous finding of federal jurisdiction in potential patent defenses of the defendants. At the time, there were non-diverse defendants, but RP Healthcare voluntarily dismissed them so that by the time of final judgment there was a proper basis for federal jurisdiction. Turning to the merits, RP Healthcare alleged that Pfizer sued Ranbaxy for infringement of a Lipitor patent and that the parties entered into a reverse settlement agreement, which RP Healthcare claimed was a per se antitrust violation of the act. A reverse settlement occurs when a patent holder sues an alleged infringer and the suit is settled with a payment from the patent holder to the infringer in exchange for a promise from the infringer to exit the market for a period of time that falls within the term of the patent at issue. A reverse settlement is not a per se antitrust violation; instead, it implicates rule of reason analysis and antitrust concerns when payments are "large and unjustified." Therefore, the court affirmed dismissal of RP Healthcare's complaint.

By Jerome W. Hoffman

In Federal Trade Comm'n v. Sanford Health, No. 1:17-133, 2017 WL 7369054 (D. N.D. Dec. 13, 2017), the court preliminary enjoined the merger of two large physician practices in North Dakota's Bismarck/Mandan market on the grounds that the proposed merger would substantially lessen competition in four physician service lines that it deemed separate product markets without close substitutes: general surgery, OB/GYN, adult primary care and pediatric services. As a result of the merger, the combined entity would have had between 80 percent and 100 percent of the market share of the four service lines in question. The court concluded that the evidence did not demonstrate that Sanford's chief competitor, CHI, would be able to recruit enough physicians timely to replace the lost patient referrals. Recruitment of physicians to North Dakota is difficult historically due to the weather and other market conditions. Furthermore, Sanford is an integrated network, including a hospital and insurance plan, meaning the merger would affect more than just the physician services market. In granting the preliminary injunction, the court rejected Sanford's defenses based on enhanced efficiencies and the need to maintain its negotiating power with Blue Cross/Blue Shield of North Dakota, which is the largest commercial insurer in North Dakota. The court also discounted Sanford's promise to not raise reimbursement rates. The court found instead that the creation of a near-monopoly provider of physician services in the Bismarck-Mandan area would likely lead to higher reimbursement rates and higher premiums for consumers.

By Nathan A. Adams IV

In In re: Flonase...