California Supreme Court allows “pay-to-delay” suit to proceed

The California Supreme Court has revived a series of antitrust suits against drug manufacturers Bayer and Barr Laboratories. The cases stem from an agreement between brand-name manufacturer Bayer and generic manufacturer Barr, under which Bayer agreed to pay Barr $398.1 million in exchange for Barr postponing the sale of the generic version of Bayer’s antibiotic Cipro.

Such agreements, called “pay-to-delay” agreements, have been frequently challenged under the antitrust laws.

In a unanimous decision discussing the intersection between antitrust and patent law, the California court explained:

Under federal antitrust law, these settlements are not immune from scrutiny, even if they limit competition no more than a valid patent would have. (Federal Trade Commission v. Actavis, Inc. (2013) 570 U.S. ___, ___ (Actavis).) We conclude the same is true under state antitrust law. Some patents are valid; some are not. Sometimes competition would infringe; sometimes it would not. Parties illegally restrain trade when they privately agree to substitute consensual monopoly in place of potential competition that would have followed a finding of invalidity or noninfringement. The Court of Appeal ruled to the contrary; we reverse.

The decision is here.

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