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Antitrust, UCL and Privacy

Competition: Winter 2017-18, Vol. 27, No. 1

CAUSATION PRINCIPLES IN PHARMACEUTICAL ANTITRUST LITIGATION

By Steve D. Shadowen1

Antitrust plaintiffs bring private claims in the pharmaceutical arena that arise from two recurring sets of facts in which brand-drug manufacturers allegedly delay or impair competition from generic-drug manufacturers. In "exclusion payment" or "pay-for-delay" antitrust cases, plaintiffs allege that the brand manufacturer, in the context of settling patent litigation, paid the generic manufacturer to withdraw its challenge to the patent and delay entry into the market. In "product-hopping" cases, plaintiffs allege that the brand manufacturer reformulated its product and switched the built-up base of prescriptions from the original to the reformulated product, in order to shield the prescription base from automatic generic substitution.

Courts are well along in establishing the rules for liability in exclusion-payment cases.2 Product-hopping liability rules are currently less well defined, but the broad outlines are coming into view.3 With liability standards established or on the horizon, the locus of contention in private litigation is increasingly shifting to causation: what evidence must plaintiffs adduce in order to permit a jury to conclude that the antitrust violation caused the injury for which plaintiffs seek recovery?

Borrowing from the common law of torts, courts in antitrust cases apply the familiar rule that plaintiffs must prove that the violation was a "material" or "substantial" cause of the injury. This is a different inquiry than determining the quantum of antitrust damage that the plaintiffs sustained. In determining damages, the plaintiffs compare the price that they actually paid to the price that they would have paid absent the violation—a comparison of the "actual world" to the "but-for world." This requires plaintiffs to offer a reconstruction of what likely would have happened absent the violation. This is not the relevant analytical framework for determining whether the violation likely caused an injury to plaintiffs. In determining causation, the jury considers the nature of the violation and the injury that actually occurred, and then makes a common-sense judgment about whether the violation likely caused the injury. For causation, plaintiffs need not offer any reconstructed "but-for world."

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