In re HIV Antitrust Litigation

Background

Plaintiffs moved for a new trial under Federal Rule of Civil Procedure 59 after a jury verdict in defendants’ favor. They argued that the verdict was contrary to the clear weight of the evidence on two questions concerning alleged anticompetitive conduct:

1. Whether plaintiffs proved that Gilead had market power in relevant markets that included Truvada and/or Atripla. 2. Whether the April 25, 2014, patent settlement agreement between Gilead and Teva included a “reverse payment” intended to delay generic entry and avoid the risk of generic competition.

The questions concerned the first step of the “rule of reason,” the antitrust framework used to evaluate whether challenged conduct produced significant anticompetitive effects in a relevant market. The jury answered both questions in defendants’ favor. The verdict form instructed the jury to skip the remaining questions if it answered “no” to both market-power questions, but the jury answered the pay-for-delay question as well.

Jury Answers and Waiver

Plaintiffs argued that the court should disregard the answer to the pay-for-delay question as surplusage because the jury had gone beyond the verdict form’s instructions. Defendants argued that the court should consider both answers.

The court concluded that plaintiffs had strong waiver problems. Plaintiffs did not object when the jury asked whether it could skip the market-power question, when the courtroom deputy read both answers, during the jury poll, or before the jury was discharged. The court explained that plaintiffs could have asked the court to direct the jury to follow the verdict-form instructions or could have requested that the jury reconsider its answers before discharge.

The court also ruled that, even if plaintiffs had not waived the argument, the pay-for-delay answer should not be disregarded. The court distinguished cases involving inconsistent jury answers that violated verdict-form instructions. Here, the answers were consistent: a “no” answer on either market power or pay-for-delay would prevent antitrust liability under the first-step analysis. The court also found that the jury could reasonably have viewed both questions as independent reasons supporting a defense verdict.

Market Power and Relevant Market

A relevant product market includes the product at issue and economic substitutes—other products that could substantially constrain the manufacturer’s ability to raise prices. The jury instructions allowed consideration of whether products were reasonably interchangeable, whether consumers changed their purchases in response to price changes, and other evidence about substitution and market perceptions.

Plaintiffs argued that the relevant markets consisted only of the brand drugs and their generic versions. They relied in part on evidence that Gilead increased prices by more than six percent per year before generic entry, while sales declined. The court found, however, that the clear weight of the evidence did not support plaintiffs’ narrow market definition.

The court noted competing expert testimony. Defendants’ expert, Dr. Wu, testified that other, newer HIV treatments constrained Gilead’s pricing and that consumers switched to newer drugs before generic entry. The court also noted that Atripla sales had fallen significantly before generic entry and that Truvada sales had declined even when sales for both HIV treatment and preexposure prophylaxis were counted. The court concluded that the evidence did not establish that only the brand drug and its generic version belonged in the relevant market.

Because plaintiffs’ proposed relevant markets were not supported by the clear weight of the evidence, the court found no miscarriage of justice in the jury’s “no” answer to the market-power question. The court said it therefore did not need to decide market power itself. It added that, even if it considered the issue, plaintiffs’ evidence concerning supracompetitive prices, high gross margins, and reduced output would not require a ruling in their favor because defendants offered competing evidence and interpretations.

Pay-for-Delay

The court separately considered whether the clear weight of the evidence required a new trial on the pay-for-delay question. Plaintiffs presented evidence supporting an inference that the settlement involved a large and unjustified reverse payment. But the court held that this did not mean the clear weight of the evidence favored plaintiffs.

The court focused on the settlement’s provisions governing Teva’s entry date. One provision could accelerate Teva’s entry to six months before another generic manufacturer’s authorized entry. The court identified other possible paths for a generic manufacturer to enter before or at the same time as Teva, including launching while risking patent infringement litigation, invalidating Gilead’s patents, or obtaining permission to sell an authorized generic. The court found that the evidence about these alternatives could support defendants’ position that the exclusivity provision had limited value when the agreement was made.

The court also credited defendants’ argument that the settlement’s entry date could reflect the strength of Gilead’s patents rather than a payment in exchange for delayed entry. Plaintiffs had presented evidence that Teva was likely to prevail in patent litigation, but defendants presented evidence supporting lower probabilities of success and the validity of Gilead’s patents. The court concluded that the jury reasonably could have found that the agreement did not involve a payment for delay, or that the provision reflected the patent merits rather than an anticompetitive exchange.

Disposition

Judge Chen denied plaintiffs’ motion for a new trial. The court concluded that plaintiffs had not shown a miscarriage of justice regarding either market power in a relevant market or pay-for-delay. The order stated that Phase I of the trial was complete, set a status conference concerning Phase II, and disposed of Docket No. 2088.