The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
In re Seroquel XR (Extended Release ©
Quetiapine Fumarate) Antitrust
Litigation
Master Docket No. 20-1076-CFC
This Document Relates to:
All Actions
MEMORANDUM ORDER
Pending before me is Plaintiffs’ Daubert Motion No. 2 to Exclude Certain
Opinions of Dr. Maria Garibotti. D.I. 654. I write for the parties and incorporate
by reference the background and applicable legal standards set forth in my
Memorandum Order issued on March 20, 2025 (D.I. 837).
Plaintiffs first seek to preclude Dr. Garibotti from offering at trial her
opinion that the alleged reverse payment was not large compared to AstraZeneca’s
Seroquel XR revenues. D.I. 655 at 5; see D.I. 656-1 at 32-33. Plaintiffs say that
this comparison “is directly contrary to Actavis,” D.I. 655 at 5, and that therefore it
does not satisfy Rule 702’s reliability! and fit requirements. See D.I. 655 at 1.
According to Plaintiffs, Actavis “requires the size of a reverse payment to be
assessed in terms of the litigation expenses the brand company avoided by
settling.” D.I. 655 at 5. The Supreme Court, however, made clear in Actavis that
“the size” of the payment is not to be assessed in terms of avoided litigation
expenses. The Court held in Actavis that whether a reverse payment “brings about
anticompetitive effects” in violation of federal antitrust law “depends upon [1] its
size, [2] its scale in relation to the payor’s anticipated future litigation costs, [3] its
independence from other services for which it might represent payment, and [4] the
lack of any other convincing justification.” FTC v. Actavis, Inc., 570 US. 136,
159 (2013) (emphasis added). Thus, under Actavis, the payment’s size is a
consideration separate and distinct from the payment’s scale in relation to avoided
litigation expenses; and both factors—along with two other factors—are to be
weighed in determining the lawfulness of the challenged payment.
Third Circuit law also makes clear that Actavis does not require the size of a
reverse payment to be assessed solely in terms of avoided litigation expenses. In
neti eens a matter of law are unreliable and thus inadmissible
under Rule 702. VLSI Tech. LLC v. Intel Corp., 2022 WL 2304112, at *3 (D. Del.
2022).
In re Lipitor Antitrust Litig., 868 F.3d 231 (3d Cir. 2017), for example, the court
held that the challenged reverse payment was plausibly unlawful in part because it
“far exceeded” “any services provided by” the generic manufacturer. Jd. at 253—
54. And in FTC v. AbbVie Inc., 976 F.3d 327 (3d Cir. 2020), the court held that
the challenged reverse payment was plausibly large in part because it “exceeded
what [the generic manufacturer] had projected it was likely to earn by winning the
infringement suit and marketing its generic[.]” Jd. at 357.
Plaintiffs insist that “[t]he Supreme Court [in Actavis] expressly rejected
Dr. Garibotti’s comparison of the reverse payment’s size to the value of brand
sales.” D.I. 655 at 6. Their failure to provide a citation in support of this assertion
is not surprising, as the Court in Actavis neither expressly nor impliedly rejected
the challenged comparison. Rather, the Court rejected in Actavis the so-called
“scope-of-the-patent” test—under which settlement agreements were “immune
from antitrust attack” if the generic’s licensed entry occurred before the patent
expired—and held that reverse-payment settlements of patent cases could be
subject to antitrust liability under the so-called “rule of reason.” See Actavis,
570 U.S. at 141, 159. The Court did not address whether it is appropriate to
compare the revenues generated from sales of the brand drug to the amount of the
reverse payment in assessing the lawfulness of the payment. The Court certainly
did not “expressly reject[] Dr. Garibotti’s comparison of the reverse payment’s size
to the value of brand sales,” as Plaintiffs contend.
Finally, Plaintiffs argue in their Reply Brief that “Dr. Garibotti’s view that
the brand’s monopoly profits are a benchmark for what is ‘large’ is inconsistent
with Actavis” because “Actavis’[] concern was with brand manufacturers using
‘monopoly profits to avoid the risk of patent invalidation or a finding of
noninfringement.’” D.I. 782 at 2-3 (quoting Actavis, 570 U.S. at 156). Plaintiffs
say that “[a]llowing an argument that a reverse payment is not large compared to
brand profits would allow the brand to argue that it can use monopoly profits to
avoid [the risk of patent invalidation or a finding of noninfringement] since those
profits always dwarf the generic’s competitive earnings (and the payments required
to induce the generic to postpone such earnings).” D.I. 782 at 3 (emphasis in the
original). Putting aside whether Plaintiffs waived this argument,” the argument
fails on the merits because it “put[s] the cart before the horse—i.e., [it] essentially
assumes that [AstraZeneca]’s monopoly profits were not based on a lawful
monopoly arising from the patent but rather based on an unlawful monopoly
because the patent is either invalid or not infringed.” Jn re HIV Antitrust Litig.,
2023 WL 5670808, at *8 (N.D. Cal. Mar. 19, 2023).
2 See Lampkins v. Mitra OSR, LLC, 2018 WL 6188779, at *3 n.2 (D. Del. Nov. 28,
2018) (deeming argument raised for first time in a reply brief as waived).
In short, Dr. Garibotti’s use of AstraZeneca’s profits from Seroquel XR sales
as a benchmark for assessing whether the challenged reverse payment was
unlawful under Actfavis is neither explicitly nor implicitly barred by Actavis or
Third Circuit case law. Accordingly, I will not exclude her comparison of those
profits with the size of the challenged reverse payment as unreliable or unfit under
Rule 702,
Il.
Plaintiffs next seek to preclude Dr. Garibotti from offering at trial her
opinions that AstraZeneca derived significant value from the challenged settlement
in reducing the costs of uncertainty about when generic competition would occur
and that this value bears on whether the challenged reverse payment was large.
Dr. Garibotti referred to this uncertainty in her report as “business uncertainty.”
D.I. 656-1 at 30. According to Dr. Garibotti, this uncertainty carried financial
consequences for AstraZeneca because, while the underlying patent litigation was
pending, “AstraZeneca executives would have needed to decide how much to
invest in marketing for Seroquel XR not knowing the precise date of Handa’s entry
and generic competition.” D.I. 656-1 at 30. In Dr. Garibotti’s opinion, if the
executives guessed wrong about the level of generic competition, the cost of over-
investment or underinvestment “could reach into the tens of millions of dollars in
lost sales.” D.I. 656-1 at 31.
Here again, Plaintiffs argue that Dr. Garibotti’s consideration of the costs of
business uncertainty “is directly contrary to Actavis,” D.I. 655 at 9, and therefore is
unreliable and unfit for admission under Rule 702, D.I. 655 at 1. And, here again,
Plaintiffs read into Actavis a holding that does not exist. The word “uncertainty”
does not appear in the majority opinion in Actavis, and nowhere in that opinion did
the Court preclude a judge or jury from considering the costs of business
uncertainty in determining whether a challenged reverse payment was large or
unlawful.
Plaintiffs seem to suggest that Actavis precludes consideration of the costs of
business uncertainty because “[u}nder Actavis, anticompetitive harm arises from a
payment that ‘likely seeks to prevent the risk of competition.’” D.I. 655 at 9
(quoting Actavis, 570 U.S. at 157). If this is in fact Plaintiffs’ argument, it fails for
two reasons. First, “preven[ting] the risk of competition” is not the same thing as
mitigating business uncertainty. Second, Plaintiffs omitted three key words—“if
otherwise unexplained”—from the sentence they quote from Actavis. The
“relevant anticompetitive harm” recognized in the sentence Plaintiffs quote from
Actavis arises from a “payment [that] (if otherwise unexplained) likely seeks to
prevent the risk of competition.” 570 U.S. at 157 (emphasis added). As the Court
went on to note:
Although the parties may have reasons to prefer
settlements that include reverse payments, the relevant
antitrust question is: What are those reasons? If the basic
reason is a desire to maintain and to share patent-
generated monopoly profits, then, in the absence of some
other justification, the antitrust laws are likely to forbid
the arrangement.
Id. at 158. The Court did not say in Actavis that “some other justification” cannot
include mitigating the costs of business uncertainty.
Plaintiffs also point to the Third Circuit’s holding in AbbVie that Actavis
made it unlawful for a patentee to use its monopoly profits to avoid the risk of
patent invalidation or a finding of noninfringement. See D.I. 655 at 9; 976 F.3d
at 352. Avoiding the risk of a litigation outcome, however, is not the same thing as
avoiding the business costs associated with not knowing the outcome of the
underlying patent litigation. As Defendants state in their briefing: “Dr. Garibotti
made clear that, from an economic perspective, the uncertainty she considers a
patentee to face is not simply whether it will win or lose, but rather, not knowing
the final answer to that question.” D.I. 708 at 7 (emphasis in the original).
In sum, then, Dr. Garibotti’s consideration of the costs of business
uncertainty is not contrary to the law and is neither unreliable nor unfit under
Rule 702.
Il.
Plaintiffs next argue that Dr. Garibotti’s method of identifying offsetting or
redeeming virtues is contrary to law and therefore unreliable and unfit for
admission as evidence under Rule 702. D.J. 655 at 1, 10. In Actavis, the Court
stated that “offsetting or redeeming virtues are sometimes present” in reverse-
payment settlement agreements and held that a defendant can defeat an antitrust
claim by presenting at trial such “legitimate justifications” that “explain[ ] the
presence of the challenged [reverse-payment] term and show[ ] the lawfulness of
that term under the rule of reason.” 570 U.S. at 156. In this case, Dr. Garibotti has
identified the alleged reverse payment’s “offsetting or redeeming virtues” by
“comparing the actual world outcome—the Settlement Agreement as it was agreed
and the resulting timing and effect of generic entry—to what would have occurred
had the parties chosen to continue with litigation.” D.I. 656-1 at 35. Dr. Garibotti
thus quantified the settlement’s procompetitive benefits by calculating the
difference between what Plaintiffs paid for Seroquel XR in the actual world and
what they would have paid had generic entry not occurred until December 1, 2017,
after the expiration of AstraZeneca’s patent. D.I. 656-1 at 36. Plaintiffs say this
analysis is contrary to law in three ways.
First, Plaintiffs argue that an assumption underlying Dr. Garibotti’s
procompetitive benefits calculation—.e., that AstraZeneca’s patent would have
prevented generic entry prior to its expiration because it was valid and infringed—
is “the ‘scope-of-the-patent’ test that Actavis rejected.” D.I. 655 at 11. The
“scope-of-the-patent” test immunized settlement agreements “from antitrust
attack” if the generic’s licensed entry occurred before the patent expired. Actavis,
570 U.S. at 141. Plaintiffs are correct that the Court in Actavis rejected that test
and held that such agreements could trigger antitrust liability under the rule of
reason. But the Court did not hold or suggest in any way that an antitrust
defendant could not argue as part of the rule of reason analysis that a settlement
that licenses generic entry before the patent’s expiration is procompetitive
compared to a scenario in which the brand prevails in the underlying patent
litigation and prevents generic entry until the patent’s expiration date.
Second, Plaintiffs argue that Dr. Garibotti’s method of identifying the
settlement’s procompetitive justifications must be excluded as contrary to law
because “it violates fundamental antitrust law that the competitive effects of an
agreement must be determined as of the time of the agreement.” D.I. 655 at 10-11.
Defendants concede that Dr. Garibotti “considered later arising facts” when
identifying the settlement’s procompetitive benefits, but they argue that her
analysis is nonetheless admissible. D.I. 708 at 12, 13. Defendants also make the
point that my answer to the question of whether the jury should be allowed to
consider events that occurred after the negotiation of the challenged reverse
payment will affect other significant legal matters in the case, including causation.
D.I. 708 at 15. And they say it would be inappropriate to resolve this larger issue
in the context of this Daubert motion. D.I. 708 at 15. Defendants ask in their
response brief for an opportunity to provide supplemental briefing to the extent I
would be inclined to rule on the issue, D.I. 708 at 15 n.5, and Plaintiffs say that
they “welcome” that request, D.I. 782 at 8. Since I agree that supplemental
briefing would be helpful, I will defer ruling on this issue until I have the benefit of
that briefing.
Third, Plaintiffs argue that Dr. Garibotti’s method of identifying
procompetitive justifications is contrary to law because “it assesses the competitive
effects of the settlement rather than the reverse payment [(i.e., AstraZeneca’s no-
AG promise and its 4-million-dollar cash payment)].” D.I. 655 at 11. Plaintiffs
insist that “Third Circuit law is unambiguous that it is the defendants’ burden to
justify the reverse payment, not the settlement as a whole” and thus, Dr. Garibotti’s
discussion of the settlement’s unchallenged provisions “does not fit this case
challenging the use of a reverse payment.” D.J. 655 at 16-17; see also D.I. 782
at 9. In support of this proposition, Plaintiffs cite the Third Circuit’s decision in Jn
re Lipitor, in which the Third Circuit stated that “defendants have the burden of
justifying the rather large reverse payment.” 868 F.3d at 256; D.I. 655 at 16.
But, as Defendants point out, Lipitor is not an unambiguous command to
ignore unchallenged provisions of the settlement agreement when conducting a
rule of reason analysis. See D.I. 708 at 17. In Lipitor, the Third Circuit held
merely that the defendants, at the motion-to-dismiss stage, had not explained why
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“other elements of the settlement” justified the at-issue payment. 868 F.3d. at 256.
That holding, in my view, implies that other provisions of the settlement agreement
should be considered when evaluating whether the reverse payment was justified.
Defendants also cite Actavis and Ohio v. Am. Express Co.,
585 U.S. 529 (2018) for the proposition that “[u]nder the rule of reason, it is
Defendants’ burden to offer procompetitive justifications for the challenged
restraint, not the agreement as a whole.” D.I. 655 at 16. But those cases in no way
suggest that the factfinder must ignore unchallenged provisions of the settlement
agreement when evaluating the procompetitive justifications of the challenged
payment.
Other courts that have considered this very question have rejected Plaintiffs’
position—and for good reason. Taking such a narrow view divorces the alleged
reverse payment from the business context in which it was negotiated. See In re
Solodyn (Minocycline Hydrochloride) Antitrust Litig., 2018 WL 734655, at *4
(D. Mass. Feb. 6, 2018). The settlement should be evaluated “as a whole, and not
in a piecemeal, provision-by-provision approach” because, after all, settlements are
“negotiated as a whole, agreed to as a whole, and [go] into effect as a whole.” Jn
re Wellbutrin XL Antitrust Litig., 133 F. Supp. 3d 734, 753-54 (E.D. Pa. 2015).
“(Failing to evaluate the agreement as a whole would overlook context essential to
determining any possible [pro]competitive effects.” Jd. at 754. Thus, the fact that
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Dr. Garibotti evaluated the procompetitive justifications of the settlement as a
whole and not just the alleged reverse payment does not render her opinions
inadmissible under Rule 702.
In sum, then, I reject Plaintiffs’ first and third arguments that Dr. Garibotti’s
method of identifying offsetting or redeeming virtues is contrary to law, and I will
defer ruling on Plaintiffs’ second argument until I receive the parties’ supplemental
briefing on that issue.
IV,
Finally, Plaintiffs seek to preclude Dr. Garibotti from offering at trial her
opinion that the model used by Plaintiffs’ causation expert, Dr. Keith Leffler, is
unreliable because it cannot “predict with any certainty what two competing parties
would have negotiated.” D.I. 655 at 18 (quoting paragraph 187 of Dr. Garibotti’s
expert report). Plaintiffs argue that Dr. Garibotti’s critique of Dr. Leffler’s model
is “contrary to law” and therefore inadmissible under Rule 702 because
“Tc]ausation need not be proven with certainty.” D.I. 655 at 18.
Plaintiffs do not cite any case that states literally that “causation need not be
proven with certainty,” and in any event, consistent with Dr. Garibotti’s deposition
testimony—“I don’t think I’m offering the opinion that you need absolute
certainty,” D.I. 709-1 at 105 (Tr. 281:15—16)—_1I do not infer from her phraseology
12
that she understood or meant to convey that Plaintiffs must establish causation
“with certainty.”
More to the point, Plaintiffs’ argument is premature, as I have yet to finalize
Jury instructions. Accordingly, I will deny the motion to the extent it seeks a ruling
at this juncture that would prohibit Dr. Garibotti from using the words “predict
with any certainty” at trial. Plaintiffs conclude their argument with these two
sentences: “The Court will instruct the jury on Plaintiffs’ burden to prove
causation. It should not permit Dr. Garibotti to offer a conflicting opinion on the
level of certainty required.” D.I. 655 at 19. That sounds right to me. I will
instruct the jury on causation, and I will not permit any expert to offer an opinion
that conflicts with an instruction. (Of course, to the extent an expert offered at trial
an opinion that conflicted with the jury instructions, opposing counsel would be
able to use that conflicting testimony to undermine the expert’s credibility.)
Defendants do not dispute these points. As Defendants’ counsel stated at the
February 6 oral argument, he intends to be “mindful of” the jury instructions at
trial when he questions Dr. Garibotti on direct examination precisely to avoid her
using “a word on direct examination that is going to get instructed out[.]”
2.6.25 Tr. 222:14—16 (docketed as D.I. 825).
* ok OK OK
NOW THEREFORE, at Wilmington on this Thirty-first day of March in
2025, it is HEREBY ORDERED that Plaintiffs’ Daubert Motion No. 2 to Exclude
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Certain Opinions of Dr. Maria Garibotti (D.I. 654) is DENIED IN PART and
DEFERRED IN PART. It is FURTHER ORDERED that the parties shall meet
and confer and propose no later than April 4, 2025 a schedule for additional
briefing with respect to the issue of whether, and if so, to what extent, events that
occurred after the date of the challenged settlement agreement may be considered
at trial.
wo
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