Pleading Standards: The Hidden Threat to Actavis

Posted by Social Science Research Network

Pleading Standards: The Hidden Threat to Actavis

Michael A. Carrier (Rutgers Law School)
Abstract:      In FTC v. Actavis, the Supreme Court issued one of the most important antitrust decisions in the modern era. It held that a brand drug company’s payment to a generic firm to settle patent litigation and delay entering the market could violate the antitrust laws.

Since the decision, courts have analyzed several issues, including causation, the role of the patent merits, and whether “payment” is limited to cash. But one issue — the pleading requirements imposed on plaintiffs — has slipped under the radar. This issue has the potential to undercut antitrust law, particularly because settlements with payment and delayed entry today typically do not take the form of cash. The complexity of non-cash conveyances increases the importance of the pleading stage.

For that reason, it is concerning that several courts have imposed unprecedented hurdles. For example, the district court in In re Effexor XR Antitrust Litigation failed to credit allegations that a generic delayed entering the market because a brand promised not to introduce its own “authorized generic” that would have dramatically reduced the true generic’s revenues. The same judge, in In re Lipitor Antitrust Litigation, dismissed a complaint despite allegations that the generic delayed entry in return for the brand’s forgiveness of hundreds of millions of dollars in potential damages in separate litigation.

This essay first introduces the Supreme Court’s Actavis decision. It then discusses the pleading standards articulated by the Court in Bell Atlantic v. Twombly and Ashcroft v. Iqbal. Turning to the cases that applied excessively high pleading requirements, it next focuses on the Effexor and Lipitor cases. Finally, it analyzes the settlement cases that applied a more justifiable analysis.

The essay concludes that the imposition of excessive standards, as was done by the Effexor and Lipitor courts, threatens to overturn established pleading standards and undercut the landmark Actavis decision. Such a result would significantly weaken the antitrust analysis of potentially anticompetitive settlements.