Archives – April, 2015

Judge Seeks Precision in Cephalon Expert Reports

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By: Saranac Hale Spencer

Defense lawyers have 30 days to whittle down their 13 voluminous expert reports to the essential points before the federal judge overseeing the case decides who will be allowed to testify to what at trial.

U.S. District Judge Mitchell S. Goldberg of the Eastern District of Pennsylvania, who is handling the case filed by the Federal Trade Commission and competing pharmaceutical companies against Cephalon and four generic drugmakers over their alleged reverse-payment settlements, asked the defense lawyers to distill the reports into seven-to-10 paragraph abstracts for the court to review.

He made the request toward the end of a Daubert hearing, which allows parties in a case to challenge expert testimony before the start of trial and is named for the 1993 U.S. Supreme Court case Daubert v. Merrell Dow Pharmaceuticals, on Monday.

“They need to be precise, with facts to back up opinions,” Goldberg said of what he expects from the abstracts. “I want it succinct.”

The hearing was permeated with differing interpretations of the U.S. Supreme Court’s 2013 opinion in Federal Trade Commission v. Actavis, which dealt with the issue of reverse-payment settlements, which are the deals made by major pharmaceutical companies with generic drugmakers in order to keep the cheaper drugs off the market.

“This is the playbook,” Goldberg told the dozens of lawyers gathered in the courtroom, referring to Actavis.

“You’re hyper-focusing on one section and I think that you’re losing sight of what I think is, frankly, the prevailing guidance from the Supreme Court, which is, it’s a rule-of-reason case,” Goldberg told Russell Chorush, of Heim, Payne & Chorush in Houston. Chorush is on the team representing one of the plaintiffs in the case, King Drug Co.

In January, Goldberg denied the defendants’ motion for summary judgment, ruling that challenges to reverse-payment settlements don’t have a new threshold to meet, in an opinion that defined the contours left open in Actavis.

Actavis primarily instructs that the familiar antitrust rule-of-reason analysis be applied to cases challenging reverse-payment settlements. This analysis does not include a ‘threshold burden,’” as the defendants had argued.

Cephalon, the maker of the name-brand wakefulness drug called Provigil, and the four generic drugmakers with which there were deals, ranging from $25 million to $164 million, are the defendants in the case. They argued that with the Actavis opinion, the Supreme Court had introduced a new threshold for challengers to meet in cases like this.

The majority’s opinion in Actavis, while it does emphasize the importance of the size of the payments and the ability to justify them, it doesn’t explicitly spell out a threshold encompassing those two things.

Goldberg integrated the duty to address the size and the justification for the payment into two different parts of the rule-of-reason analysis.

Since it was introduced in the U.S. Supreme Court’s 1918 decision in Chicago Board of Trade v. United States, the burden-shifting rule-of-reason analysis applied to antitrust cases has stayed, essentially, the same, according to the opinion.

The plaintiffs bear the initial burden to show that the deals they challenge have had anti-competitive effects. If they meet that bar, then the burden shifts to the defendants to show that the challenged deal had contributed to objectives that promote competition. Following that, the plaintiffs can come back and demonstrate that the challenged deal wasn’t necessary to promote competition.

The judge then considers the arguments and balances them to rule on whether the deal was anti-competitive.

“We’re going to get into issues about anti-competitive versus competitive and burden-shifting as I’ve explained it, and we’re going to, mostly, I think, as the trial is going to occur, is going to be about explaining the supply agreements and things like that—and that is the bulk of the case,” Goldberg told Chorush at the hearing Monday.

Later, the judge suggested bifurcating the case, which also involves both patent and antitrust claims, saying, “Maybe we do bifurcate the Walker Process and Actavis cases and maybe in the Actavis case we just have a trial about the agreements and keep the patent out of it.”

In 2011, Goldberg found that Cephalon’s patent was invalid and that the company committed fraud on the patent office by concealing the fact that a French company, Laboratoire L. Lafon, had actually developed the drug.

Not only did Cephalon hide from the U.S. Patent and Trademark Office that the French company had invented the drug, with the active ingredient of modafinil, it also misled the office by suggesting that it had altered the particle size of modafinil, according to that opinion, the judge had found.

Lawyers on Monday had differing views of the extent to which the patent could be discussed at trial.
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