The California Supreme Court Cements Vigorous Scrutiny of Reverse-Payment Settlements (Cipro)

Posted by Social Science Research Network

The California Supreme Court Cements Vigorous Scrutiny of Reverse-Payment Settlements (Cipro) Michael A. Carrier (Rutgers University)

Abstract: On May 7, 2015, in a case involving the antibiotic Cipro, the California Supreme Court overturned a lower court decision granting summary judgment for defendants. On behalf of all seven Justices, Justice Kathryn Werdegar wrote an opinion that supported the U.S. Supreme Court’s decision in FTC v. Actavis and filled in some of the holes left open by the Court, cementing vigorous scrutiny of agreements by which brand-name drug companies pay generics to delay entering the market.

The California Supreme Court’s decision was important for two primary reasons. First, it supported Actavis, offering a structured Rule of Reason that infers anticompetitive harm from an unexplained payment for delay and limits the justifications defendants can offer.

Second, the Court supplemented Actavis. It filled in holes relating to burdens of proof and production. And it made clear that defendants bear the burden of production on evidence relating to litigation costs and payments for generic services. The Court also offered robust responses to defendants’ arguments that antitrust scrutiny would harm innovation, chill generic challenges, and reduce the frequency of settlement.

In offering the first appellate ruling since Actavis, and one that supported and buttressed the U.S. Supreme Court’s ruling, the California Supreme Court’s decision in Cipro promises to be influential.