Case: 18-2621 Document: 260 Page: 1 Date Filed: 12/04/2020
`
`
`
`UNITED STATES COURT OF APPEALS
`FOR THE THIRD CIRCUIT
`
`
`PRECEDENTIAL
`
`
`No. 18-2621
`
`
`
`
`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.)
`
`
`
`No. 18-2748
`
`
`
`
`
`
`FEDERAL TRADE COMMISSION,
`
`v.
`
`ABBVIE INC; ABBOTT LABORATORIES; UNIMED
`PHARMACEUTICALS, LLC; BESINS HEALTHCARE,
`INC.; *TEVA PHARMACEUTICALS USA, INC.
`
`
`
`
`
`
`UNITED STATES COURT OF APPEALS
`FOR THE THIRD CIRCUIT
`
`
`PRECEDENTIAL
`
`
`No. 18-2621
`
`
`
`
`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.)
`
`
`
`No. 18-2748
`
`
`
`
`
`
`FEDERAL TRADE COMMISSION,
`
`v.
`
`ABBVIE INC; ABBOTT LABORATORIES; UNIMED
`PHARMACEUTICALS, LLC; BESINS HEALTHCARE,
`INC.; *TEVA PHARMACEUTICALS USA, INC.
`
`
`
`
`Case: 18-2621 Document: 260 Page: 2 Date Filed: 12/04/2020
`
`Abbvie Inc; Abbott Laboratories; Unimed
`Pharmaceuticals, LLC
`Appellants
`
`(*Dismissed Pursuant to Court’s 3/12/19 Order.)
`
`
`
`No. 18-2758
`
`
`
`
`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.)
`
`
`
`On Appeal from the United States District Court
`for the Eastern District of Pennsylvania
`(D.C. No. 2-14-cv-05151)
`District Judge: Honorable Harvey Bartle, III
`
`
`
`Argued on January 15, 2020
`
`
`
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`2
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`Case: 18-2621 Document: 260 Page: 3 Date Filed: 12/04/2020
`
`Before: HARDIMAN, PORTER and PHIPPS, Circuit Judges.
`
`(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
`
`
`
`
`
`3
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`Case: 18-2621 Document: 260 Page: 4 Date Filed: 12/04/2020
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`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
`
`
`
`4
`
`
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`Case: 18-2621 Document: 260 Page: 5 Date Filed: 12/04/2020
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`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.
`
`
`
`5
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`Case: 18-2621 Document: 260 Page: 6 Date Filed: 12/04/2020
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`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
`
`
`
`
`
`OPINION OF THE COURT
`
`
`
`
`HARDIMAN, Circuit Judge.
`
`
`TABLE OF CONTENTS
`
`
`I. FACTUAL BACKGROUND ......................................... 9
`
`A.
`
`B.
`
`C.
`
`FDA Approval under the Hatch-Waxman Act ........... 9
`
`Patent disputes under the Hatch-Waxman Act ........ 11
`
`Therapeutic equivalence ratings ............................. 12
`
`D. Hypogonadism and testosterone
`
`replacement therapies ............................................. 13
`
`
`
`6
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`Case: 18-2621 Document: 260 Page: 7 Date Filed: 12/04/2020
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`E. AndroGel ............................................................... 14
`
`F.
`
`The ’894 patent’s prosecution history ..................... 15
`
`G. AndroGel’s competitors ......................................... 18
`
`H. The lawsuits against Teva and Perrigo .................... 18
`
`I.
`
`J.
`
`The settlements with Perrigo and Teva ................... 21
`
`Teva and Perrigo’s generic versions of AndroGel ... 23
`
`II.
`
`PROCEDURAL HISTORY ....................................... 24
`
`III.
`
`JURISDICTION ........................................................ 26
`
`IV. LIABILITY ............................................................... 35
`
`A. The District Court erred by rejecting the
`
`reverse-payment theory.. ........................................ 35
`
`B.
`
`
`
`
`C.
`
`
`
`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. ..................................................................... 53
`
`The District Court did not err in concluding
`AbbVie and Besins had monopoly power in the
`relevant market. ..................................................... 77
`
`V. REMEDIES .................................................................. 83
`
`A. The District Court erred in ordering disgorgement.. 83
`
`B.
`
`
`The District Court did not abuse its discretion in
`denying injunctive relief. ........................................ 93
`
`C. Remand on the reverse-payment theory is not
`
`futile. ..................................................................... 97
`
`
`
`
`
`
`
`
`
`
`
`
`7
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`
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`Case: 18-2621 Document: 260 Page: 8 Date Filed: 12/04/2020
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`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
`
`
`
`8
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`Case: 18-2621 Document: 260 Page: 9 Date Filed: 12/04/2020
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`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
`
`
`
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`Case: 18-2621 Document: 260 Page: 10 Date Filed: 12/04/2020
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`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 (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
`(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 (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
`
`
`
`10
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`Case: 18-2621 Document: 260 Page: 11 Date Filed: 12/04/2020
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`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 two pathways “speed the introduction of low-
`
`cost generic drugs to market” and promote competition in the
`pharmaceutical industry. Actavis, 570 U.S. at 142 (internal
`citation omitted).
`
`B. Patent disputes under the Hatch-Waxman Act
`
`The Hatch-Waxman Act also has provisions that
`
`encourage the quick resolution of patent disputes. See
`Wellbutrin, 868 F.3d at 144. A paragraph IV notice
`“automatically counts as patent infringement.” Id. (quoting
`Actavis, 570 U.S. at 143 (citing 35 U.S.C. § 271(e)(2)(A))).
`After receiving this notice, a patentee has 45 days to decide
`whether to sue. 21 U.S.C. § 355(j)(5)(B)(iii).
`
`
`
`11
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`Case: 18-2621 Document: 260 Page: 12 Date Filed: 12/04/2020
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`To help a patentee make that decision, the company
`
`seeking approval of a generic drug often allows the patentee’s
`outside counsel to review the company’s application in secret.
`If the patentee sues within the time limit, the FDA cannot
`approve the company’s application for a generic drug until one
`of three things happens: (1) a court holds that the patent is
`invalid or has not been infringed; (2) the patent expires; or (3)
`30 months elapse, as measured from the date the patentee
`received the paragraph IV notice. 21 U.S.C. § 355(j)(5)(B)(iii).
`
`The automatic, 30-month stay creates tension with the
`
`Hatch-Waxman Act’s procompetitive goals. Simply by suing,
`a patentee can delay the introduction of low-cost generic drugs
`to market and impede competition in the pharmaceutical
`industry. Cf. Actavis, 570 U.S. at 142.
`
`C. Therapeutic equivalence ratings
`
`After the FDA approves a company’s generic drug, the
`
`company can seek a therapeutic equivalence (TE) rating.
`“Products that are determined to be therapeutically equivalent
`[to the brand] are assigned an ‘A’ or ‘AB’ rating. Generic
`products for which
`therapeutic equivalence cannot be
`determined are assigned a ‘B’ or ‘BX’ rating.” AbbVie, 329 F.
`Supp. 3d at 107. Generic drug companies usually prefer A or
`AB ratings because every state’s law “either permit[s] or
`require[s] pharmacists to dispense a therapeutically equivalent,
`lower-cost generic drug in place of a brand drug.” Mylan
`Pharm. Inc. v. Warner Chilcott Pub. Ltd., 838 F.3d 421, 428
`(3d Cir. 2016) (internal quotation marks and citations omitted).
`
`
`
`12
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`Case: 18-2621 Document: 260 Page: 13 Date Filed: 12/04/2020
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`D. Hypogonadism and testosterone replacement
`therapies
`
`Hypogonadism is a clinical syndrome resulting from
`
`low testosterone in the human body. See AbbVie, 329 F. Supp.
`3d at 108. It affects an estimated 2-6 percent of the adult male
`population in the United States and causes “decreases in energy
`and libido, erectile dysfunction, and changes in body
`composition.” Id.
`
`testosterone
`treat hypogonadism with
`Doctors
`
`replacement therapies (TRTs). TRTs include injectables,
`topical/transdermals (TTRTs), and other therapies. Companies
`first marketed injectables in the 1950s. Because generic
`injectables have been available for decades, they are the least
`expensive. They involve dissolving testosterone in a liquid and
`injecting it into the patient’s body every one to three weeks.
`Some patients administer injections to themselves at home,
`while others receive injections at their doctor’s office or a
`specialized testosterone clinic. By contrast, TTRTs first
`appeared in the 1990s and are more expensive. They deliver
`testosterone to the patient’s body through a patch or gel applied
`to the patient’s skin. Gels are applied daily.
`
`TRTs have different benefits and drawbacks. Some
`
`patients dislike injectables because the injection is painful, or
`because the “peak in testosterone level” after the injection
`causes “swings in mood, libido, and energy.” Id. at 109. Many
`of
`these patients prefer TTRTs because
`they release
`testosterone steadily. Other patients dislike TTRT gels.
`Common complaints
`include skin
`irritation and
`the
`inconvenience of having to apply the gel daily. And patients
`sometimes transfer the testosterone gel to others inadvertently
`through skin-to-skin contact. Finally, some patients dislike
`
`
`
`13
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`Case: 18-2621 Document: 260 Page: 14 Date Filed: 12/04/2020
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`TTRT patches, which can irritate the skin and are visible to
`other people, depending on where the patch is applied.
`
`E. AndroGel
`
`In the 1990s, Laboratoires Besins International S.A.S.
`
`(LBI)—a corporate affiliate of Besins’s parent company—
`developed the TTRT gel that became AndroGel. In 1995, LBI
`licensed to Unimed certain intellectual property relating to the
`gel, and Unimed assumed responsibility for marketing the gel
`in the United States. In exchange, Unimed agreed to pay LBI a
`royalty on the gel’s net sales. Unimed secured FDA approval
`for the gel in 2000. That same year, Unimed and Besins filed a
`joint U.S. patent application, and, in 2003, U.S. Patent No.
`6,503,894 (the ’894 patent) issued.
`
`Today, Besins and AbbVie co-own the ’894 patent.
`
`AbbVie acquired Unimed’s interest in the patent as follows: in
`1999, Unimed was acquired by Solvay; in 2010, Solvay was
`acquired by Abbott; in 2013, Abbott separated into two
`companies—Abbott and AbbVie—with AbbVie assuming all
`of Abbott’s propriety pharmaceutical business, including its
`interest in AndroGel.
`
`Solvay brought AndroGel to market in 2000. At the
`
`time, AndroGel was available only in a sachet form at 1%
`strength. From 2004-2013, Solvay and its successors marketed
`AndroGel in a metered-dose pump form. And in 2011, Abbott
`started marketing AndroGel at 1.62% strength. Sales of
`AndroGel 1.62% grew more slowly than anticipated, but by
`June 2012, they comprised most of AndroGel’s total sales.
`
`AndroGel has been a huge commercial success. Its
`
`annual net sales sometimes surpassed a billion dollars and
`
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`remained strong even after generic versions of AndroGel
`entered the market in 2015. From 2009-2015, it generated a
`high profit margin of about 65 percent.
`
`F. The ’894 patent’s prosecution history
`
`TTRT gels use “penetration enhancers” to accelerate the
`
`delivery of testosterone through a patient’s skin. AndroGel’s
`penetration enhancer is isopropyl myristate.
`
`Unimed and Besins’s joint patent application was U.S.
`
`Patent Application Serial No. 09/651,777. As originally
`drafted, claim 1 of the patent application claimed all
`penetration enhancers:
`
`A pharmaceutical composition useful for the
`percutaneous
`delivery
`of
`an
`active
`pharmaceutical ingredient, comprising:
`
`(a) a C1-C4 alcohol;
`
`(b) a penetration enhancer;
`
`(c) the active pharmaceutical ingredient; and
`
`(d) water.
`
`App. 909 (emphasis added). The penetration enhancers then in
`existence numbered in the tens of millions.
`
`In June 2001, the patent examiner rejected this claim as
`
`obvious over two prior art references—Mak in view of Allen.
`Mak disclosed the penetration enhancer oleic acid used in a
`transdermal
`testosterone gel. Allen disclosed
`isopropyl
`myristate, isopropyl palmitate, and three other penetration
`
`
`
`15
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`enhancers used in a nitroglycerin cream. The examiner
`explained that “since all composition components herein are
`known to be useful for the percutaneous delivery of
`pharmaceuticals, it is considered prima facie obvious to
`combine them into a single composition useful for the very
`same purpose.” App. 1014–16.
`
`In October 2001, Unimed and Besins amended the
`
`patent application’s claim 1 to recite at least one of 24
`penetration enhancers, including isopropyl myristate and
`isostearic acid. Isopropyl palmitate was not among the 24.
`Unimed and Besins also added several new claims. Claim 47
`recited “a penetration enhancer selected from the group
`consisting of isopropyl myristate and lauryl alcohol.” App.
`1022. And claims 61 and 62 recited only isopropyl myristate as
`a penetration enhancer.
`
`Unimed and Besins sought “reconsideration and
`
`withdrawal of the [obviousness] rejections and allowance of
`the[se] claims.” App. 1039. In support, they cited AndroGel’s
`commercial success. See id.; see generally Graham v. John
`Deere Co. of Kansas City, 383 U.S. 1, 17 (1966) (holding
`commercial success is a “secondary consideration” suggesting
`nonobviousness). They also argued “[t]he mere fact that
`references can be combined or modified does not render the
`resultant combination obvious unless the prior art also suggests
`the desirability of the combination.” App. 1030–31 (citations
`omitted). For three reasons, they said, the prior art did not
`suggest combining Mak and Allen. First, Mak “[taught] away
`from using the presently claimed penetration enhancers by
`focusing on the superiority of oleic acid.” App. 1032. Second,
`the claimed penetration enhancers had an “unexpected and
`unique pharmacokinetic and phamacodynamic profile.” Id.
`And third, “the prior art recognize[d] the chemical and
`
`
`
`16
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`Case: 18-2621 Document: 260 Page: 17 Date Filed: 12/04/2020
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`physiologic/functional differences of penetration enhancers,
`including the differences between oleic acid and the claimed
`enhancers, such as isopropyl myristate.” App. 1037–38.
`
`Attorneys for Unimed and Besins then met with the
`
`examiner for an interview. The examiner opined that “claims
`61-62 are . . . allowable over the prior art.” App. 1084. She also
`noted that the attorneys “argued claim 47 is novel [and]
`nonobvious over the prior art because the prior art does not
`teach the composition with particular concentrations [of
`isopropyl myristate and lauryl alcohol].” Id.
`
`In December 2001 and February 2002, Unimed and
`
`Besins twice more amended the patent application. They
`cancelled claims 1 and 62, amended claim 47 to cover only a
`composition comprising isopropyl myristate, and modified the
`concentration ranges for isopropyl myristate in claim 61. With
`each amendment, they sought “reconsideration and withdrawal
`of the [obviousness] rejections and allowance of the[se]
`claims.” App. 1095, 1129.
`
`The examiner issued a notice of allowability. She wrote
`
`that “[t]he claimed pharmaceutical composition consisting
`essentially of the particular ingredients herein in the specific
`amounts, is not seen to be taught or fairly suggested by the
`prior art.” App. 1152. She clarified that she considered the
`amendments “all together,” and they sufficed to “remove the
`prior art rejection . . . over [Mak in view of Allen].” Id.
`
`In January 2003, the ’894 patent issued. It expired on
`
`August 30, 2020.
`
`
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`17
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`Case: 18-2621 Document: 260 Page: 18 Date Filed: 12/04/2020
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`G. AndroGel’s competitors
`
`When Solvay brought AndroGel to market in 2000, its
`
`only competitors were injectables and two TTRT patches (i.e.,
`Testoderm and Androderm). Since then, companies have
`marketed four other TTRT gels (i.e., Testim, Axiron, Fortesta,
`and Vogelxo). Companies have also developed other TRTs,
`including Striant (a buccal tablet applied twice daily to a
`patient’s gums), Testopel (a pellet surgically inserted into a
`patient’s body every three to six months), and Natesto (a nasal
`spray administered three times a day).
`
`H. The lawsuits against Teva and Perrigo
`
`In December 2008, Perrigo filed two ANDAs for a
`
`generic 1% testosterone gel in sachet and pump forms, and in
`June 2009 it served paragraph IV notices on Unimed and
`Besins. It asserted that because its gel used the penetration
`enhancer isostearic acid instead of isopropyl myristate, the gel
`would not literally infringe the ’894 patent. It also argued the
`gel would not infringe the patent under the doctrine of
`equivalents, which provides
`that “[t]he scope of a
`patent . . . embraces all equivalents to the claims described.”
`Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. (“Festo
`VIII”), 535 U.S. 722, 732 (2002). Perrigo explained the ’894
`patent’s prosecution history would estop Unimed and Besins
`from claiming equivalency between isostearic acid and
`isopropyl myristate, because they originally claimed isostearic
`acid before excluding it in response to a rejection. This
`limitation on the doctrine of equivalents is known as
`prosecution history estoppel. Id. at 733–34.
`
`Solvay, Unimed, and Besins retained outside counsel to
`
`review Perrigo’s ANDAs. In July 2009, Solvay and Unimed
`
`
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`18
`
`
`
`Case: 18-2621 Document: 260 Page: 19 Date Filed: 12/04/2020
`
`issued a press release stating that they had carefully evaluated
`the ANDAs and decided not to sue Perrigo, in part because
`Perrigo’s gel “contains a different formulation than the
`formulation protected by the AndroGel patent.” AbbVie, 329 F.
`Supp. 3d at 111. Besins also decided not to sue.
`
`That same year, the FDA learned that patients were
`
`accidentally transferring TTRT gels to children through skin-
`to-skin contact. AndroGel’s new owner Abbott petitioned the
`FDA to require Perrigo to resubmit its 2009 ANDAs as hybrid
`NDAs. See 21 C.F.R. § 10.30 (FDA citizen petition form). That
`would require Perrigo to investigate whether isostearic acid
`poses a higher risk of accidental transfer than isopropyl
`myristate. Abbott also asked the FDA to require Perrigo to
`serve new paragraph IV notices on Abbott and Besins, thereby
`reopening the 45-day window for them to decide whether to
`sue. The FDA granted Abbott’s petition in relevant part.
`
`In January 2011, Teva filed a hybrid NDA for a generic
`
`1% testosterone gel in sachet and pump forms, and in March
`2011 it served paragraph IV notices on Abbott, Solvay,
`Unimed, and Besins. Teva asserted its gel would not literally
`infringe the ’894 patent because it used isopropyl palmitate
`instead of isopropyl myristate. It also explained that the ’894
`patent’s prosecution history would estop Abbott and Besins
`from claiming infringement on the ground that isopropyl
`palmitate is equivalent to isopropyl myristate. Abbott and
`Besins retained outside counsel to review Teva’s hybrid NDA.
`
`On April 29, 2011, Abbott, Unimed, and Besins sued
`
`Teva for patent infringement in the United States District Court
`for the District of Delaware. They argued that isopropyl
`myristate and isopropyl palmitate were equivalent. The lawsuit
`triggered the Hatch-Waxman Act’s automatic, 30-month stay
`
`
`
`19
`
`
`
`Case: 18-2621 Document: 260 Page: 20 Date Filed: 12/04/2020
`
`on FDA approval for Teva’s gel. Teva responded that
`prosecution history estoppel applied because Unimed and
`Besins’s October 2001 amendment—which narrowed the
`application’s claim 1 from all penetration enhancers to a list of
`24—surrendered isopropyl palmitate. Abbott, Unimed, and
`Besins disagreed. They cited an exception to prosecution
`history estoppel—known as “tangentiality”—that applies if
`“the rationale underlying the amendment [bore] no more than
`a tangential relation to the equivalent in question.” Festo VIII,
`535 U.S. at 740. Abbott, Unimed, and Besins argued the
`October 2001 amendment sought to overcome Mak’s use of
`oleic acid and was thus tangential to isopropyl palmitate, which
`Allen disclosed. The Court set trial for May 2012.
`
`In July 2011, Perrigo filed a hybrid NDA for generic 1%
`
`testosterone gel, and in September 2001, it served new
`paragraph IV notices on Abbott, Unimed, and Besins. It again
`asserted its gel would not infringe the ’894 patent. And it added
`that “a lawsuit asserting the ’894 patent against Perrigo would
`be objectively baseless and a sham, brought in bad faith for the
`improper purpose of, inter alia, delaying Perrigo’s NDA
`approval.” AbbVie, 329 F. Supp. 3d at 114. A bad faith motive
`for suing would be “particularly apparent,” Perrigo said, in
`light of Solvay’s July 2009 press release. Id. Abbott, Unimed,
`and Besins retained outside counsel to review Perrigo’s hybrid
`NDA.
`
`In August 2011, Abbott petitioned the FDA not to grant
`
`therapeutic equivalence ratings to hybrid NDAs referencing
`AndroGel. Alternatively, it asked the FDA to assign such
`products BX ratings.
`
`On October 31, 2011, Abbott, Unimed, and Besins sued
`
`Perrigo in the United States District Court for the District of
`
`
`
`20
`
`
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`Case: 18-2621 Document: 260 Page: 21 Date Filed: 12/04/2020
`
`New Jersey. That lawsuit triggered the Hatch-Waxman Act’s
`automatic, 30-month stay on FDA approval for Perrigo’s gel.
`
`Four in-house patent attorneys in AbbVie’s intellectual
`
`property group and AbbVie’s general counsel decided to sue
`Teva and Perrigo. Those attorneys had “extensive experience
`in patent law and with AbbVie.” See id. at 113. However, “[n]o
`business persons at AbbVie were involved in the decision to
`sue.” Id. As for Besins, its in-house counsel Thomas
`MacAllister decided to sue. MacAllister is an experienced
`intellectual property attorney and a former patent examiner.
`
`I. The settlements with Perrigo and Teva
`
`In December 2011, Abbott and Perrigo settled. They
`
`agreed to dismiss all claims and counterclaims with prejudice;
`Abbott agreed to pay Perrigo $2 million as reasonable litigation
`expenses; and Abbott agreed to license Perrigo to market its
`generic 1% testosterone gel on either January 1, 2015 or when
`another generic version came to market, whichever was sooner.
`(The last provision is known as an acceleration clause). Perrigo
`unsuccessfully pushed for an earlier market entry date in
`settlement negotiations. Its assistant general counsel Andrew
`Solomon later said he predicted the acceleration clause would
`provide Perrigo with an earlier entry date, because he saw “a
`very good probability Teva could prevail” against Abbott and
`Besins at trial in the other lawsuit. AbbVie, 329 F. Supp. 3d at
`115. He also said he advised Perrigo that it had a 75 percent
`chance of success, had the litigation proceeded to trial. He
`explained this figure meant Perrigo felt “very, very strongly
`about [its] chances for success, recognizing that there is [an]
`inherent uncertainty . . . any time a case gets in front of an
`arbiter.” App. 4071.
`
`
`
`21
`
`
`
`Case: 18-2621 Document: 260 Page: 22 Date Filed: 12/04/2020
`
`Abbott and Teva also settled in December 2011, soon
`
`after the court set a trial date. Abbott agreed to license Teva to
`market its generic 1% testosterone gel on December 27,
`2014—almost six years before the ’894 patent expired. Teva
`pushed unsuccessfully for an earlier market–entry date in
`settlement negotiations.
`
`On the same day Abbott and Teva settled the
`
`infringement suit, they also made a deal involving a popular
`brand-name cholesterol drug named TriCor. A previous
`settlement between Abbott and Teva had set Teva’s entry in the
`TriCor market for July 2012. And because Teva was the first
`generic challenger to TriCor, Teva was entitled to 180 days of
`marketing exclusivity. Teva was struggling to capitalize on the
`exclusivity period, though, because it could not secure FDA
`approval. In the December 2011 deal, Abbott agreed to grant
`Teva a license to sell a generic version of TriCor, which Abbott
`would supply to Teva at Teva’s option, for a four-year term
`beginning in November 2012. This supply agreement provided
`for Teva to pay Abbott the costs of production, an additional
`percentage of that cost, and a royalty.
`
`
`According to the FTC, the December 2011 settlement
`agreement and TriCor deal were an illegal reverse payment. A
`reverse payment occurs when a patentee, as plaintiff, pays an
`alleged infringer, as defendant, to end a lawsuit. See
`Wellbutrin, 868 F.3d at 142 n.3 (citing Actavis, 570 U.S. at
`140–41). Such agreements can be anticompetitive if they allow
`a brand-name company to split its monopoly profits with a
`generic company in exchange for the generic agreeing to delay
`market entry. As applied here, the FTC alleges Abbott
`calculated that it would sacrifice about $100 million in TriCor
`sales, but that was a small fraction of the billions of dollars in
`AndroGel revenue it protected by deferring competition in the
`
`
`
`22
`
`
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`Case: 18-2621 Document: 260 Page: 23 Date Filed: 12/04/2020
`
`TTRT market for three years. Deferring competition also gave
`Abbott time to shift sales to Androgel 1.62%, for which there
`were no generic competitors. As for Teva, it “concluded that it
`would be better off by sha
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