Background of the Litigation
The litigation between Gilead Sciences, Inc. and Teva Pharmaceuticals USA, Inc. revolves around allegations of an anticompetitive "pay-for-delay" scheme involving two key HIV drugs: Truvada (emtricitabine/tenofovir) and Atripla (efavirenz/emtricitabine/tenofovir). The case, filed in 2019, was brought by a group of insurers, health plans, and other payors who claimed that Gilead and Teva engaged in an illegal agreement to delay the entry of generic versions of these drugs, thereby maintaining high prices and reducing access to lower-cost generics[3][4].
Key Allegations
The plaintiffs alleged that Gilead and Teva entered into a settlement agreement in 2014 that constituted a "pay-for-delay" deal. Here are the core allegations:
- Reverse Payment: The plaintiffs claimed that Gilead made a "reverse payment" to Teva, not in the form of money, but by offering Teva six months of de facto generic exclusivity. This exclusivity allegedly delayed the entry of other generic competitors and allowed Gilead to maintain monopoly prices for Truvada and Atripla[1][2][3].
- Market Power: The plaintiffs argued that Gilead had market power in a relevant market defined narrowly to include only Truvada, Atripla, and their generic equivalents. They contended that this market power was abused through the settlement agreement[1][2].
- Delayed Generic Entry: The plaintiffs asserted that the settlement delayed the entry of generic versions of the drugs, which would have otherwise entered the market earlier, either because Teva would have prevailed in its patent challenge or negotiated an earlier entry date without the settlement[2][3].
Defense Arguments
Gilead and Teva presented several key defense arguments:
- No Reverse Payment: The defendants argued that there was no actual payment made between Gilead and Teva. Instead, the settlement allowed Teva to enter the market in 2020, rather than waiting until 2021 when some of Gilead's patents would have expired[1][5].
- No Delayed Entry: The defendants contended that the settlement did not delay Teva's entry into the market. They pointed out that other generic companies could also challenge Gilead's patents and enter the market around the same time as Teva. In fact, ten other companies entered the market six months after Teva, following their own settlements with Gilead[1][5].
- Lack of Market Power: The defendants argued that the relevant market should be defined more broadly to include alternative HIV therapies. Within this broader market, Gilead faced significant competition from innovative and more effective HIV treatments, thereby lacking market power[1][4].
Teva's Waiver of Privilege
A significant aspect of the defense was Teva's decision to waive its attorney-client privilege regarding the underlying patent litigation. This allowed the introduction of Teva's internal documents, which showed that Teva believed it had only a 17.5% chance of winning the patent litigation against Gilead. These documents supported the defense's argument that Teva was unlikely to prevail and thus did not receive any significant value from the settlement[1][5].
Jury Verdict
After a five-week trial and two days of deliberation, the jury in the Northern District of California found in favor of Gilead and Teva. The jury determined that:
- Gilead Lacked Market Power: The jury agreed with the defendants that Gilead did not have market power within the broader defined market that included alternative HIV therapies[1][4].
- No Reverse Payment: The jury found that there was no reverse payment made by Gilead to Teva to delay the entry of generic competition[1][3][4].
Impact and Consequences
The verdict marked a significant victory for Gilead and Teva, dismissing the plaintiffs' claims for $3.6 billion in damages. This outcome highlights the challenges in proving "pay-for-delay" allegations, especially when the settlement does not involve direct monetary payments and when the generic company's internal documents support the defense's arguments.
Industry Implications
This case has important implications for the pharmaceutical industry:
- Settlement Agreements: The verdict suggests that settlement agreements between branded and generic pharmaceutical companies can be structured in ways that avoid antitrust violations, even if they provide some form of exclusivity to the generic company.
- Market Definition: The case emphasizes the importance of defining the relevant market correctly in antitrust cases. A broader market definition can significantly impact the outcome of such litigation.
- Transparency and Documentation: Teva's decision to waive privilege over its internal documents was crucial in this case. It underscores the importance of transparency and the potential benefits of disclosing internal communications in litigation.
Key Takeaways
- No Anticompetitive Conspiracy: The jury found no evidence of an anticompetitive conspiracy between Gilead and Teva to delay generic competition.
- Market Power and Competition: The broader market definition including alternative HIV therapies was critical in demonstrating Gilead's lack of market power.
- Settlement Structure: The case shows that settlement agreements can be structured to avoid antitrust violations, even with exclusivity provisions.
- Importance of Documentation: Internal documents can be pivotal in supporting or refuting allegations in antitrust litigation.
Frequently Asked Questions (FAQs)
Q: What were the main allegations against Gilead and Teva in this litigation?
A: The plaintiffs alleged that Gilead and Teva engaged in a "pay-for-delay" scheme by settling patent litigation in a way that delayed the entry of generic versions of Truvada and Atripla, thereby maintaining high prices.
Q: What was the nature of the "reverse payment" alleged in this case?
A: The alleged "reverse payment" was not a monetary payment but rather six months of de facto generic exclusivity granted to Teva.
Q: How did the jury define the relevant market in this case?
A: The jury accepted the defendants' broader market definition, which included Truvada, Atripla, their generic equivalents, and alternative HIV therapies.
Q: What role did Teva's waiver of privilege play in the trial?
A: Teva's waiver of privilege allowed the introduction of internal documents showing that Teva believed it had a low chance of winning the patent litigation, supporting the defense's arguments.
Q: What were the financial implications of the verdict for the plaintiffs?
A: The plaintiffs were seeking $3.6 billion in damages, which were dismissed by the jury's verdict in favor of Gilead and Teva.
Cited Sources
- Wilson Sonsini Goodrich & Rosati, "Jury Finds Gilead and Teva Did Not Engage in an Anticompetitive Pay-for-Delay Scheme for HIV Drugs," July 5, 2023.
- Crowell & Moring, "HIV Drug Buyers Urge $3.6B Verdict Against Gilead And Teva," June 27, 2023.
- BioSpace, "Gilead and Teva Prevail in Potentially $3.6B 'Pay-to-Delay' Lawsuit," July 3, 2023.
- Law.com, "Litigators of the (Past) Week: A Defense Win for Gilead and Teva in a Rare Trial on Pay-For-Delay Claims," July 12, 2023.
- Kirkland & Ellis, "A Defense Win for Gilead and Teva in a Rare Trial on Pay-For-Delay Claims," July 12, 2023.
