Joseph Saveri and Ryan McEwan of the Joseph Saveri Law Firm won the prestigious 2016 CLAY Awards from the California Daily Journal and California Lawyer, which honored lawyers from 21 matters by selecting them as “California Lawyer Attorneys of the Year.” Joe and Ryan were recognized for their antitrust success in In re Cipro Cases I and II, a suit involving a price-fixing scheme in the pharmaceutical sector:
Mark Lemley of Durie Tangri LLP, working from briefing by Joseph R. Saveri and Eric B. Fastiff, argued successfully for a consumer class before the state Supreme Court that found pharmaceuticals are wrongly paying generic competitors to delay bringing lower-priced drugs to market. The arguments were developed over the long history of a case first filed in 2000 by Saveri and Fastiff when both were at Lieff Cabraser Heimann & Bernstein LLP. Saveri has since left Lieff Cabraser and formed the Joseph Saveri Law Firm, Inc. Fastiff, who remains a Lieff Cabraser partner, said it was a rare class action where the delay benefitted the plaintiffs because the state of the law advanced while state court stays held up the action during the years a parallel federal case was in litigation. “We retained our optimism throughout the delay that the class we represented was indeed victimized by these payments to the generics,” Fastiff said. “It took a decade and a half for the law to catch up to our optimism.” While the case was slowly progressing toward the state high court, the U.S Supreme Court decided FTC v. Actavis, 133 S.Ct. 2223 (2013), instructing courts to use “rule of reason” analysis in evaluating pay-to-delay deals under antitrust law. The Cipro opinion went further, devising a four-part test for antitrust violations.
“When we first filed,” Saveri said, “we had a very clear idea that these agreements are inherently anticompetitive under state and federal antitrust laws. Then came a period when the courts took the view that these agreements were not illegal. I’m proud that we were right on the law and proud of our determination not to take no for an answer. We were able to prevail and swing the pendulum back.”
A group of generic firms led by Barr Laboratories Inc. accepted $398.1 million from Bayer AG to stay out of the lucrative ciprofloxacin antibiotic market from 1996 to 2003. With no market competition over that time, Bayer earned more than $1 billion from sales of its patented Cipro drug.
The drug companies structured the deal as a settlement of patent litigation, contending that insulated it from standard antitrust tests.
The state high court agreed that Bayer’s pay-to-delay action might have violated California’s antitrust law, the Cartwright Act, and potentially cost consumers hundreds of millions of dollars. The unanimous court reversed an earlier appellate opinion and teed up the case for trial. In re Cipro Cases I & II, S198616 (May 7, 2015, petition for review filed Feb. 15, 2012).
It was the first time a state high court had handled pay-to-delay tactics following Actavis’ guidance.
The challenge facing Saveri, Fastiff, and Lemley was to turn vague language in Actavis into a legal rule courts could apply. They made the strategic decision to seek a “structured” rule of reason test, a concept akin to a quick look standard that would make such deals presumptively unlawful if they met specified criteria. Lemley persuaded the justices to flesh out the legal standard for pay-to-delay settlements in a way that forecloses many of the most common defenses pharmaceutical companies have offered.
“We’re already seeing the direct effects of the Cipro decision,” Lemley said. “Once the California Supreme Court made it clear that this sort of settlement is illegal, California corporations could see that they are liable to lose an antitrust lawsuit if they keep up this conduct.”