We’ve written about in the past on the PAL blog about, Provigil, a prescription drug used to treat narcolepsy and other sleep conditions, which is made by Cephalon (NasdaqGS:CEPH). [See previous posts such as “FTC member speaks out on Provigil generics payoff case,” and “Jessica’s story: No help from Cephalon for cost of Provigil>

Cephalon is alleged to have paid off four generic drug companies to keep more affordable generic versions of Provigil off the market. PAL member AFSCME District Council 37 Health & Security Plan joined a nationwide class action lawsuit in Eastern Pennsylvania against Cephalon and the four generic companies (Teva, Ranbaxy, Barr and Mylan) on behalf of a nationwide class of consumers, health plans and other “third party payors.”

The Federal Trade Commission also sued Cephalon back in February, in the U.S. District Court for the District of Columbia. Yesterday, the Judge hearing that case ordered that the FTC’s case be transferred to the Eastern District of Pennsylvania, where the class action lawsuit is pending.

In ordering the transfer, the Judge in the FTC case primarily relied on the conclusion that having the FTC case and the class action before the same Judge would avoid “inconsistent judgments.” As Judge John D. Bates wrote in his opinion:

The most compelling point in Cephalon’s favor is the risk of inconsistent judgments that would arise if this case is not transferred. Although there are some differences between the private parties’ claims against Cephalon and the government’s case — namely that the private litigants must demonstrate antitrust injury and prove damages — at the core the two matters involve identical issues of fact and law. Hence, absent transfer to the Eastern District of Pennsylvania, Cephalon would be forced simultaneously to litigate two cases in two different courts arising out of precisely the same conduct. That obviously presents a serious risk of inconsistent judgments. If this Court, for instance, were to find that reverse-payment settlements are lawful while the district court in Pennsylvania reached the opposite result, or vice versa, Cephalon would face a classic case of conflicting judgments. That is exactly the sort of inconsistent result that transfer can ameliorate.

The Judge then went on to accuse the FTC of “forum shopping,” and of in fact looking to create inconsistent judgments so as to increase the likelihood that the Supreme Court would accept a case and determine once and for all whether reverse payment settlements violate the antitrust laws. As the Judge wrote:

Indeed, the FTC would likely be content if this case did result in inconsistent judgments. That is because, as Cephalon points out, the Commission is rather openly shopping for a circuit split on the issue of reverse-payment Hatch-Waxman settlements, and all the better if the FTC could potentially arrange for two courts of appeals — the Third and D.C. Circuits — to decide that question in the context of what is essentially the same case. To be sure, the Commission is free to exercise its prosecutorial judgment to pursue a strategy that it believes will ultimately result in Supreme Court review. But it strikes this Court as both odd and unreasonable to do so at the expense of exposing a single defendant (engaged in a single course of conduct) to conflicting judgments in order to advance the agency’s enforcement goals. The danger, and burden, of inconsistent judgments against one defendant based on the same events, in short, outweighs whatever legitimate interest the FTC may have in achieving that result for strategic reasons.

In 2006, the Supreme Court refused to hear an appeal in a case the FTC brought against Schering-Plough, challenging a payoff of a generic drug maker that had sought to bring a generic version of Schering’s K-Dur to market. Similarly, the Supreme Court had also refused to hear an appeal of a class action originally brought in federal court in New York, challenging a generics payoff concerning the prescription drug for breast cancer, Tamoxifen.

These two refusals by the Supreme Court to address the issue of whether a brand-name drug company paying off a generic drug company not to bring a generic to market violates the federal antitrust laws left the question open. Since that time, there has been a resurgence of such payoffs, resulting in consumers being deprived of less expensive generic drugs.

We at Prescription Access Litigation remain committed to challenging such deals and exposing them for the crude, anti-consumer payoffs that they are. It’s unclear what effect the transfer of the FTC’s case to Pennsylvania will have. Stay tuned.