Plausibly Alleging Non-Monetary Settlements As Reverse Payments After

In In re Lipitor Antitrust Litigation, No. 12 Civ. 2389 (D.N.J.), U.S. District Judge Peter G. Sheridan has confirmed his prior ruling that under the Supreme Court's decisions in Twombly, Iqbal, and FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013), plaintiffs claiming an antitrust violation based on a non-monetary settlement must allege the value of the settlement to survive dismissal of their complaint.

In a previous post, we mentioned Lipitor as a " reverse payment" case that was decided in the wake of Actavis. In Actavis, the Supreme Court ruled that reverse payments—in which a plaintiff, typically a brand-name drug maker, in a patent infringement action agrees to pay the alleged infringer, typically a generic drug manufacturer, to keep the generic maker's product off the market for a period of time—can "sometimes violate the antitrust laws." But the Court did not decide whether a settlement where no actual cash changes hands can qualify as a potentially unlawful reverse payment. As we noted, the Lipitor court answered "yes" to that question.

Nevertheless, the Lipitor court dismissed the complaint of the direct purchaser class plaintiffs because it determined that the complaint did not allege sufficient facts to plausibly allege that Pfizer had made a large and unexplained reverse payment as required by Actavis. Although the court agreed with plaintiffs that a non-monetary payment can qualify as a reverse payment, it reasoned that such a payment "must be converted to a reliable estimate of its monetary value so that it may be analyzed against the Actavis factors such as whether it is 'large.'" The complaint failed to plead sufficient facts to perform this conversion and "estimate the value of the compromise of Pfizer's damages." The court cited caselaw and literature addressing the value of a patent infringement claim and the factors that might impact a settlement of such a claim, and noted the absence of factual allegations to this effect in the complaint. Without an allegation estimating the monetary value of the settlement, the complaint did not plausibly allege a large reverse payment under Actavis. Accordingly, the court dismissed the complaint.

The Lipitor plaintiffs moved to amend the court's decision to allow them leave to replead, principally on the theory that the decision had adopted a "new, heightened standard for what a plaintiff must plead" to allege a non-monetary reverse payment under Actavis. Thus, plaintiffs contended, the...