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Nexium District Court Takes Pioneering Approach to Preliminary Jury Charge

How does a court explain the complicated area of law at the intersection of patent settlements and antitrust law to a group of lay-jurors in the wake of Actavis? The district court’s approach to preliminary jury instructions in the ongoing Nexium “reverse payment” trial provides one solution. The instructions also raise questions concerning the significance of direct evidence of market power that we previously discussed in connection with the Amex and Cephalon cases.

Judge William Young of the District of Massachusetts chose a novel approach to preliminary jury instructions: He gave the jury lengthy preliminary jury instructions, including extended readings from the Actavis decision, and then told the jury the four sequential questions it will be asked to answer concerning the alleged conspiracy between Nexium manufacturer AstraZeneca and generic rival Teva to delay the launch of generic Nexium until May 2014:

1.  Did the settlement of the AstraZeneca-Teva patent litigations result in a large and unjustified payment by Nexium manufacturer AstraZeneca to generic rival Teva?

2.  Did AstraZeneca exercise market power in the relevant antitrust market?

3.  Was the AstraZeneca-Teva Nexium settlement unreasonably anticompetitive?

4.  If not for the AstraZeneca-Teva Nexium settlement, would Teva have launched a generic version of Nexium prior to May 2014?

Why did the court start with the novel and challenging post-Actavis question of a large unjustified payment, putting it before the more familiar relevant market/market power question?

As part of pretrial proceedings, defendants requested a special verdict form with a long list of questions. For its preliminary jury instructions, the court proposed to the parties instructions that follow the general order of defendants’ proposed verdict form.

Defendants presumably wanted the jury’s focus on whether a large and unjustified payment had taken place because they think they have a strong defense on that point. Indeed, the alleged reverse payment was not a cash transfer from AstraZeneca to Teva. Instead, the supposed payment involved the settlement of a separate patent litigation between AstraZeneca and Teva involving the drug Prilosec. Teva had launched a generic equivalent of Prilosec “at-risk,” and AstraZeneca sued for infringement. In the wake of a Federal Circuit decision finding that AstraZeneca’s patent was valid, Teva paid $9 million to settle AstraZeneca’s infringement claims. But the Nexium plaintiffs contend that the “fair” value of the settlement would have been far greater if not for the “delayed entry” agreement for Teva’s generic Nexium.

The Nexium plaintiffs did not oppose the court’s proposed sequence of questions to the jury. The strategy is intriguing because the market power/relevant market question is more familiar territory for plaintiffs in pharmaceutical cases, and an affirmative answer to the question might have given plaintiffs momentum in jury deliberations. But instead of arguing that the market power/relevant question should come first, plaintiffs objected to the question being asked at all. Plaintiffs argued that “there is no need to prove a relevant market where, as here, Plaintiffs intend to prove AstraZeneca’s market power over Nexium directly.” And plaintiffs argued that the jury’s evaluation of market power could be included in its deliberation on whether the settlement was unreasonably anticompetitive.

According to plaintiffs, its “direct evidence” consists of (1) AstraZeneca analysis that “only the launch of generic Nexium was expected to cause substantial drops in sales and prices for” Nexium; (2) that AstraZeneca dropped plans to launch an authorized generic after executing the supposed “reverse payment agreements at issue, thereby reducing output”; and (3) that “AstraZeneca enjoyed consistently high profit margins on Nexium.” These are types of direct evidence sometimes proffered by plaintiffs in pharmaceutical litigations.

Defendants responded that the jury should be asked to consider market power in the context of a relevant market because “without reference to a relevant antitrust market, there is no content to the term ‘market’ in ‘market power.’”

Judge Young has come down on the side of requiring the jury to determine the relevant market when determining the existence of market power for now. In the continuing discussion of the use of direct evidence to prove market power, it will be interesting to see how the final jury instructions allow the jury to consider plaintiffs’ direct evidence.