[00:00:26] Speaker 03:
Whenever you're ready.

[00:00:27] Speaker 06:
Thank you Judge Friedland.

[00:00:28] Speaker 06:
And may it please the court.

[00:00:30] Speaker 06:
My name's Aaron Penner.

[00:00:31] Speaker 06:
I will be addressing the issues that are raised in the monopolization brief.

[00:00:37] Speaker 06:
And Mr. Hume will be addressing the issues in the trial errors brief.

[00:00:41] Speaker 06:
And I want to spend most of my time focused on the product hop issue, the product switch issue.

[00:00:49] Speaker 06:
Because if the district court got that wrong, as we believe it did,

[00:00:53] Speaker 06:
the entire case, including the pay-for-delay case, has to go back to retry plaintiff's claims here.

[00:01:01] Speaker 06:
And I want to start with the facts because they're quite remarkable.

[00:01:06] Speaker 06:
Gilead recognized as early as 2003 that to protect its monopoly from generic competition, it would have to switch patients to TAF-based drugs before its TDF-based drugs faced

[00:01:21] Speaker 06:
generic competition before the generic TDF-based drugs entered.

[00:01:28] Speaker 06:
And it hatched a scheme to do that by misrepresenting to providers and patients the purported safety benefits of TAF over TDF.

[00:01:37] Speaker 06:
Now, Gilead estimated internally that only a small minority of patients would actually benefit from the differences between TAF and TDF and their impact on renal and bone

[00:01:50] Speaker 06:
factors.

[00:01:51] Speaker 06:
But there is an internal document at the 23 excerpts of record at 5698.

[00:01:58] Speaker 06:
And what Gilead says in their business plan is what must be believed is that TAF products have significant improvements in clinical value relative to TDF.

[00:02:10] Speaker 06:
for all patients.

[00:02:11] Speaker 06:
Now that phrase clinical value is very important because Gilead did not have evidence that there was an improvement in clinical value for patients.

[00:02:20] Speaker 03:
Is it your understanding that it's predictable in advance who the patients are that will benefit?

[00:02:26] Speaker 06:
At that point

[00:02:27] Speaker 06:
Yes, Your Honor, that there were tests that were described in Gilead's internal documents about which patients did have indications of vulnerability for renal effects or bone effects.

[00:02:45] Speaker 03:
Couldn't people develop renal problems later even if they didn't have one of those?

[00:02:49] Speaker 03:
I'm trying to understand how

[00:02:52] Speaker 03:
It was misleading to say some patients benefit from this when you're going to take it for a long time and maybe you are going to eventually become one of those patients.

[00:02:59] Speaker 06:
Well, a couple things, Your Honor.

[00:03:00] Speaker 06:
So that, I think, was the essence of the district court's error was that the district court resolved factual disputes in a way that drew an inference in favor of or drew an inference against the plaintiffs when the district court said, and this is

[00:03:19] Speaker 06:
On page eight I think it's page 17 of the district court's opinion at 5788 of the excerpts of record and what the district court said was Along the lines that your honors asking even to a patient without an acute bone or renal condition there are implicitly Some benefits to taff over TDF the district court didn't cite anything for that statement

[00:03:40] Speaker 06:
And our experts said that was not correct.

[00:03:43] Speaker 06:
And what our experts said was that for many patients, there were no benefits to TAF over TDF.

[00:03:51] Speaker 06:
And I want to emphasize in that regard.

[00:03:53] Speaker 02:
Just stop there, because I had understood you were suggesting that Gilead's advertising was not actually false.

[00:04:01] Speaker 02:
But as you're presenting the argument now, it almost transforms it into not misleading, but false.

[00:04:08] Speaker 02:
Would you clarify that?

[00:04:10] Speaker 06:
Certainly, Your Honor.

[00:04:11] Speaker 06:
I don't think that we would, if the question were a fraud claim, that you can point to something that is literally false.

[00:04:20] Speaker 06:
For one thing, many of the statements that we're referring to are internal documents.

[00:04:25] Speaker 06:
They're not statements that were made externally.

[00:04:27] Speaker 06:
They're not forward, outward-facing.

[00:04:28] Speaker 06:
I can return to why it's appropriate to rely on those internal documents.

[00:04:33] Speaker 06:
But as to this point, I think where you can really see why this was so misleading is when you think about the use of Truvada for PrEP and Gilead's efforts to substitute Discovy.

[00:04:49] Speaker 06:
I know there's a lot of drug names in this case, but essentially there was only one drug, Gilead, I should say only one Gilead drug that was approved for PrEP, and that was Truvada.

[00:05:01] Speaker 06:
Discovy was introduced, it's the analogous drug that's TAF-based instead of TDF-based.

[00:05:08] Speaker 06:
And one thing, and it was in the evidence and it's worth focusing on, PrEP is different from, PrEP is treatment that's provided to patients who have not yet been infected with HIV.

[00:05:24] Speaker 06:
and so prep is not something that will be taken necessarily taken for a lifetime but instead prep is used seasonally users are frequently very young and what our experts said again this is not this was something that was very evidence-based and it was argued is that for these patients the benefit there was no but uh... clinical benefit and that's that's the key is that there were lab test differences and what

[00:05:53] Speaker 06:
The way that Gilead marketed was to say that there was a benefit to your renal health.

[00:05:57] Speaker 06:
There's a benefit to your bone health when that was not established.

[00:06:04] Speaker 03:
So DHHS though had the studies and also thought that there was a health benefit?

[00:06:10] Speaker 06:
for some patients, and I think this is why the record was factually, you know, it was factually complicated.

[00:06:20] Speaker 06:
Nevertheless, the fact that there was indeed benefit

[00:06:24] Speaker 06:
For some patients who had renal conditions or bone conditions that would make them vulnerable to the effects of tenofovir, that was indeed understood for many years prior to the study that was done comparing GenVoya, which is the new drug, to Stribild, which was the old drug.

[00:06:51] Speaker 06:
One was TDF-based, one was TAF-based.

[00:06:53] Speaker 06:
But again, and the reason why this is really a factual issue that should have gone to the jury

[00:07:00] Speaker 06:
is that when a manufacturer is making representations about the safety of its own drugs, it's predictable and appropriate that providers and patients are going to rely on those representations.

[00:07:15] Speaker 06:
And that is why it's appropriate to say that what Gilead did here was really to coerce a change.

[00:07:22] Speaker 03:
I guess I'm just confused, though, because I don't understand you to be arguing that Gilead deceived DHHS.

[00:07:29] Speaker 03:
they didn't, then how did they deceive the public by basically kind of saying the same thing that DHHS was convinced by?

[00:07:35] Speaker 06:
Because again, DHHS did not say that it was appropriate to move all patients over.

[00:07:42] Speaker 06:
And indeed, current guidance from the CDC for PrEP is that patients should not be switched

[00:07:49] Speaker 06:
If they are meaning today or current meaning then today as of then as of the as of the trial record your honor So in other words, but this is at the summary judgment stage, right?

[00:08:00] Speaker 06:
Sorry.

[00:08:01] Speaker 06:
I'm sorry your honor correct in the summary judgment record the CDC guidance was that patients that were using Truvada for prep should not switch and so do you have a statement from DHHS that says

[00:08:16] Speaker 03:
It's not a health benefit to switch.

[00:08:19] Speaker 03:
It narrows it so much that there was something misleading to not include the narrowing.

[00:08:23] Speaker 06:
I believe that what the guidance was given was, and I can try to get the exact reference from the record, what DHHS said was that a decision about whether to switch patients would depend on the particular characteristics of the patient cost and other considerations.

[00:08:43] Speaker 03:
But that doesn't sound like a definitive it's only good for old patients or it's only good for ex-patients.

[00:08:49] Speaker 06:
But again, the question is not whether TAF was a bad drug.

[00:08:54] Speaker 06:
No one is claiming that TAF was a bad drug.

[00:08:58] Speaker 06:
The issue was whether Gilead, by engaging in marketing that represented to providers, to insurers, to patients, that there was a clinical benefit

[00:09:14] Speaker 06:
to TAF over TDF for all patients, were they being misleading?

[00:09:19] Speaker 06:
Because we're talking about a situation where it's not disputed for purposes of summary judgment that Gilead has a monopoly in these cart drugs, a broad market monopoly.

[00:09:31] Speaker 06:
were also not disputed for purposes of summary judgment, that by effectuating this switch from TDF-based drugs to TAF-based drugs, Gilead was able to preserve that monopoly at a cost of billions of dollars to consumers.

[00:09:47] Speaker 06:
And so the question becomes only, was the efforts that they made to induce providers to switch

[00:09:56] Speaker 06:
potentially exclusionary.

[00:09:58] Speaker 01:
I think part of the problem here is that you have to show that what you're saying improperly induced cross the line to coercion.

[00:10:08] Speaker 06:
Your Honor, that's the language that the cases have used.

[00:10:11] Speaker 06:
And I think what coercion in this context means is that it deprives providers and patients of meaningful choice between the drugs.

[00:10:19] Speaker 06:
And the reason, and I think this is something that comes up in the Suboxone case, I know it's a district court case, not binding, but the discussion I think is useful, is that when a manufacturer talks about the safety of its own drugs and it says to providers, this drug is safer for your patients,

[00:10:37] Speaker 06:
than the drug that you're currently using.

[00:10:40] Speaker 06:
That's enormously coercive, because what provider is going to want to prescribe a drug that's riskier?

[00:10:47] Speaker 06:
What patient is going to want to take a drug that's riskier?

[00:10:50] Speaker 06:
And our experts said, and I commend the expert reports of Dr. Hardy, which are in volume 19 of the excerpts of record.

[00:11:00] Speaker 06:
And he talks about how this campaign of marketing was so effective.

[00:11:06] Speaker 06:
at leading both providers and patients to come to perceive TDF as risky and TAF as a safer alternative.

[00:11:14] Speaker 06:
And that's what led to the extremely rapid and effective switching over from TDF to TAF.

[00:11:20] Speaker 02:
I guess this seems like, you know, this definitely doesn't rise to the level of at least one of the key cases that we've looked at, which is the Second Circuit case in Namedia.

[00:11:30] Speaker 02:
So what, in your view, is

[00:11:34] Speaker 02:
the strongest case for this imposing what I'll call the soft switch analysis.

[00:11:41] Speaker 06:
Well, Your Honor, I think that suboxone is probably the discussion that's most, that is,

[00:11:48] Speaker 06:
I know it's a district court case.

[00:11:50] Speaker 06:
But I think the Namenda case, the discussion there is actually very helpful.

[00:11:54] Speaker 06:
And I understand that there are differences of degree in what happened.

[00:11:58] Speaker 06:
But the defendant there, activists, did not make the drug utterly unavailable.

[00:12:04] Speaker 06:
The kinds of claims they were making were different.

[00:12:07] Speaker 06:
But remember, in that case, patients

[00:12:14] Speaker 06:
After generic entry, this was an Alzheimer's drug.

[00:12:18] Speaker 06:
So many of the patients were going to be naive for treatment.

[00:12:21] Speaker 06:
And so the Second Circuit sort of said, well, yeah, you've switched a lot of people over, but the generics can come back in.

[00:12:29] Speaker 06:
And that's not the way that the Second Circuit looked at it.

[00:12:32] Speaker 06:
And I think that's quite right.

[00:12:33] Speaker 06:
Because again, we're talking about a situation in which it's not disputed that Gilead has the monopoly for purposes of summary judgment.

[00:12:42] Speaker 06:
And it's not disputed that the

[00:12:44] Speaker 06:
the tactics that they use were extremely effective at maintaining that monopoly.

[00:12:51] Speaker 06:
We're not disputing that the consumer effect, the consumer harm, the cost to the public was billions of dollars.

[00:12:59] Speaker 06:
And so it's appropriate for a manufacturer to be held to an appropriate standard

[00:13:08] Speaker 06:
that ensures that they do not engage in misleading marketing and again that what must be believed document I think is so important because what it says is what must be believed is that there's clinical benefit for all patients and they did not have evidence of that.

[00:13:24] Speaker 06:
There was no evidence to suggest that there was clinical benefit for all patients.

[00:13:28] Speaker 03:
Can you just give me your best site though for the idea that it was predictable in advance

[00:13:36] Speaker 03:
that there were patients who it wasn't a benefit for at the time.

[00:13:39] Speaker 06:
I would read Dr. Hardy's report in 19ER because he goes through the

[00:13:48] Speaker 06:
his discussion of why he would not have, had he known the information, he actually, I think his rebuttal report, both the opening and the rebuttal are in the excerpts of record, volume 19 of the excerpts of record, Your Honor.

[00:14:05] Speaker 06:
He goes through in his rebuttal report a number of the marketing techniques that Gilead used to try to persuade people to make this switch when it wasn't warranted.

[00:14:15] Speaker 06:
He explains

[00:14:16] Speaker 06:
in both the opening and the rebuttal report why it simply wasn't true that there was clinical benefit for most patients.

[00:14:23] Speaker 06:
And again, the PrEP example, I think, is one that helps to illustrate this.

[00:14:28] Speaker 06:
And PrEP is a huge factor within what Truvada was used for and what the generics would have replaced.

[00:14:38] Speaker 06:
Truvada for.

[00:14:41] Speaker 06:
But because of this switch over to Discovy, Discovy became, you know, was able to take a significant part of that market share.

[00:14:48] Speaker 06:
If they did that improperly, that's all that the planners have to show to establish a violation of Section 2.

[00:14:55] Speaker 06:
The damages from that alone are enormous.

[00:14:58] Speaker 06:
And again... Can we have you over your time?

[00:15:01] Speaker 03:
I think we understand your argument and maybe we better go to your colleagues since you're dividing time.

[00:15:06] Speaker 06:
Thank you very much, Your Honor.

[00:15:07] Speaker 03:
Thank you.

[00:15:14] Speaker 05:
Morning, Your Honors.

[00:15:15] Speaker 05:
Hamish Hume for the appellants.

[00:15:17] Speaker 05:
I'd like to begin with question one on market power, and then I'll address the issues on question two in the verdict form.

[00:15:23] Speaker 05:
Your Honors, the trial court committed reversible error by making a pure error of law and failing to grant summary judgment to the plaintiffs on the issue of market power.

[00:15:34] Speaker 05:
That issue of law is that in an activist case, the competitive price is the price after generic competition begins.

[00:15:42] Speaker 05:
I'd like to emphasize two points that I think inexorably support and demonstrate that rule of law.

[00:15:49] Speaker 05:
The first is that the Supreme Court and this Court have repeatedly said the purpose of a market power inquiry is to determine whether the alleged anti-competitive restraint actually has the potential for anti-competitive effects.

[00:16:06] Speaker 05:
It's focused and tailored to the allegation of the alleged restraint.

[00:16:12] Speaker 05:
That's straight out of FTC versus Indiana Federation of Dentists.

[00:16:16] Speaker 05:
This court said the same thing in the Flaw v. Hollywood Foreign Press case.

[00:16:20] Speaker 05:
There are a number of cases that say that that we cite.

[00:16:23] Speaker 05:
And here the allegation is that there was an agreement to delay generic competition.

[00:16:31] Speaker 05:
That's the allegation.

[00:16:32] Speaker 05:
And therefore, the inquiry must be focused on the competition between generics

[00:16:37] Speaker 05:
and the branded patented drug.

[00:16:39] Speaker 05:
That's the focus of the inquiry.

[00:16:41] Speaker 05:
The second point is that unlike cases where a court has to predict what would happen if an alleged restraint stopped being in place, or has to predict what the effect of a challenged merger might be on a market, here

[00:17:00] Speaker 05:
Mark in an activist case brought after generic competition finally does occur.

[00:17:04] Speaker 05:
There's actual market data to see what happens and In this case it's undisputed that after generic and competition finally began the prices for a tripla and Truvada the two drugs at issue in this trial plummeted by over 90 percent and the sales moved Dramatically 80 70 percent very quickly over to the generic so that market

[00:17:29] Speaker 05:
of the branded drug and its generic competition had an enormous difference in price when generic competition began.

[00:17:36] Speaker 05:
A 95% drop.

[00:17:39] Speaker 05:
That's not disputed.

[00:17:40] Speaker 05:
The court did not deny summary judgment by saying that was disputed.

[00:17:44] Speaker 05:
It is not disputed.

[00:17:45] Speaker 02:
It's an unusual case without a market definition, of course.

[00:17:52] Speaker 02:
But let me just ask you,

[00:17:55] Speaker 02:
Are you basically, your position is the market power has to be analyzed essentially only with an eye toward the price effects?

[00:18:03] Speaker 05:
Yes, Your Honor.

[00:18:05] Speaker 02:
And how do you, you know, you're well familiar with these other cases, functional interchangeability and cellophane, and also Illinois Tool, which says, you know, a patent could give you market power, but not necessarily.

[00:18:21] Speaker 02:
Yes.

[00:18:21] Speaker 02:
How do you square your position with those cases?

[00:18:23] Speaker 05:
Your honor, we're not asking for a presumption here about market power.

[00:18:28] Speaker 05:
We're saying, and Judge Underhill in the Agrinox case addressed Illinois tool and says his reasoning tracks our reasoning.

[00:18:36] Speaker 05:
We highly recommend reviewing that decision because I think it's exactly correct.

[00:18:41] Speaker 05:
We're just not saying there's a presumption.

[00:18:43] Speaker 05:
Some patents are worthless.

[00:18:45] Speaker 05:
He says that.

[00:18:46] Speaker 05:
If the patent's worthless, then when generic competition begins, you're not going to see a big drop in price.

[00:18:51] Speaker 05:
You're not going to see 95% drop in price in virtually all the sales moving to the generics in that market.

[00:18:58] Speaker 05:
You will not see that.

[00:19:00] Speaker 05:
And that's because the patent's worthless.

[00:19:02] Speaker 05:
But if the patent's valuable, it's precisely because it has market power that the ability to exclude the generic competition is what makes the patent valuable.

[00:19:11] Speaker 05:
And the competition that's being targeted here is precisely the competition the patent prevents.

[00:19:16] Speaker 01:
If I understand you correctly, you're not denying that there is a broader market in which drug A is competing against other HIV-branded drugs, but that for the purpose of this particular what you allege to be

[00:19:36] Speaker 01:
competitive.

[00:19:38] Speaker 01:
And that's what we're trying to do.

[00:19:39] Speaker 01:
And that's what we're trying to do with the anti competitive restreets.

[00:19:42] Speaker 01:
The real market is a versus it's generics because the whole point of excluding a generic is that it's going to compete with brand a not be C and D and that so to think I mean could you would that affect damages like to the extent it's

[00:20:03] Speaker 01:
But for the purpose of the conduct that we're worried about, we were really worried about the artificial lengthening of the time in which there would be no competition essentially against the equivalent of ourselves.

[00:20:17] Speaker 01:
For the purpose of this particular restraint,

[00:20:21] Speaker 01:
the competition that Iliad was worried about was the competition of an equivalent to itself and not really worried about, it was also competing at the same time against these other drugs on quality and other things, but it was also worried about competing against the generic equivalent of itself and that's the competition it was trying to stave off.

[00:20:42] Speaker 05:
Yes.

[00:20:42] Speaker 01:
And so for that purpose, because they are by definition the same essentially, it was only going to compete against its generic on

[00:20:51] Speaker 01:
price.

[00:20:52] Speaker 05:
That's correct your honor and I think you've got it exactly right there may be other inquiries involving these drugs in which you would need to look at the brand on brand alleged competition by the way it was overwhelmingly with other Gilead drugs and the TAF switch but yes other market inquiries might focus on that.

[00:21:09] Speaker 01:
There could be a scenario in which a brand there is no generic yet they have a patent

[00:21:21] Speaker 01:
But they're just really not that effective against other brands that are slightly different.

[00:21:26] Speaker 01:
And then when that generic was introduced, there would be really no change because they just weren't that good of a product to begin with.

[00:21:33] Speaker 01:
And I think what you're saying here is there's enough evidence that this brand was unique essentially in its effectiveness or whatever safety or whatever that it was to the extent

[00:21:46] Speaker 01:
The competition against its generic would be actually quite great because it would be competing only on price.

[00:21:53] Speaker 01:
So enough people would just want this particular drug.

[00:21:56] Speaker 01:
So the competition from the other options was not so great that it essentially negated the effectiveness of staving off the generic.

[00:22:05] Speaker 01:
Am I getting that more or less right?

[00:22:08] Speaker 05:
I believe so, Judge Song.

[00:22:10] Speaker 05:
I believe you are.

[00:22:11] Speaker 05:
But I would like to emphasize one or two points.

[00:22:14] Speaker 05:
Another way of thinking about it, which is saying the same thing, I believe, is that if there is significant competition between the brands,

[00:22:22] Speaker 05:
on price, then you will not see the dramatic drop in price when generics come on the market.

[00:22:31] Speaker 05:
The effect of that brand on brand competition on price is quote unquote priced in to the brand at the moment the generic competition begins.

[00:22:41] Speaker 05:
Judge Underhill says exactly that on page 669 of the Agrinox opinion.

[00:22:46] Speaker 05:
So I think you don't need, and in that opinion he denied discovery into what the other branded drugs were doing.

[00:22:52] Speaker 05:
He says we don't need to look at that.

[00:22:54] Speaker 05:
All we need to look at is what happened when Generics came on the market because if the price dropped dramatically, we know that

[00:23:02] Speaker 05:
that the brand is charging a higher price than the competitive price.

[00:23:07] Speaker 05:
Now, if we're talking 10%, 15%, maybe then there's an issue.

[00:23:11] Speaker 05:
But if it's a 90% drop, we know that that's a super competitive price.

[00:23:16] Speaker 05:
And to illustrate this, I would ask the court to indulge in its imagination for a moment and hypothesize the most egregious pay-for-delay deal that you can imagine.

[00:23:30] Speaker 05:
A brand company pays a hundred million dollars to a generic and they stipulate in writing You're gonna settle for year X and that's when you'll enter and if we weren't paying you the hundred million You would insist and we would agree that you could settle on an earlier date three years earlier But because of the hundred million you're gonna you're gonna come in later Okay, pure pay for delay in that case Would we be worried?

[00:23:55] Speaker 05:
To know if there's anti-competitive effects, would we be worried about anything other than whether generics drove the price down?

[00:24:02] Speaker 05:
Would we be worried about whether the branded drug competed on things like innovation and safety and ease of use?

[00:24:09] Speaker 05:
No.

[00:24:10] Speaker 05:
You wouldn't care at all about that.

[00:24:11] Speaker 05:
You would simply say you've delayed the competition that matters between the brand and the generics.

[00:24:17] Speaker 05:
And whatever the brand was doing vis-a-vis other brands is priced in.

[00:24:21] Speaker 05:
We just want to see what was it charging for those three years of delay.

[00:24:26] Speaker 05:
versus the generic competition that would have driven the price down.

[00:24:29] Speaker 05:
That's the inquiry.

[00:24:30] Speaker 05:
That sharpens the focus as to what really matters here.

[00:24:33] Speaker 05:
And it really is that simple.

[00:24:37] Speaker 05:
And other than agronauts, I think the lower courts are having trouble seeing that it's just that simple.

[00:24:44] Speaker 02:
You focused on super competitive prices.

[00:24:48] Speaker 02:
But it's interesting that you didn't cite the Rebel Oil case, which I think the district court did.

[00:24:53] Speaker 02:
It's not in your brief.

[00:24:55] Speaker 02:
But that case talks about not only super competitive prices, but also restricted output.

[00:25:01] Speaker 02:
So how does your position square or not square with Rebo?

[00:25:06] Speaker 05:
Your Honor, a couple of things.

[00:25:07] Speaker 02:
I mean, it just seemed very unusual to me that that case was not cited.

[00:25:13] Speaker 05:
Yes.

[00:25:14] Speaker 05:
Your choice is your brief.

[00:25:16] Speaker 05:
Well, I think what you're seeing is that the market power inquiry in the activist type case is a little different from in other cases.

[00:25:24] Speaker 05:
On restricted output, we would cite the court to the Epic V Apple case, page 975, and there's been another recent case

[00:25:36] Speaker 05:
That also it said really all you need this court rejects the notion that you need to look at reduction of output if you have clear direct evidence on price effects in epic games and in one of the recent case and it's telling that the Apple ease don't even argue this point about restricted output if you were going to get into it it is restricted output when you agree to

[00:25:57] Speaker 05:
restrain the amount of generic competition.

[00:26:00] Speaker 05:
But it really isn't, when you have direct evidence of a price effect that's this dramatic, I don't think the court is really going to be looking for that there's a relevance.

[00:26:09] Speaker 02:
When you just stop at the price issue?

[00:26:11] Speaker 05:
Yes, because again, again, imagine a blatant case that's clearly a pay for delay.

[00:26:16] Speaker 05:
What would the court worry about in the market power inquiry?

[00:26:20] Speaker 05:
Why would you be worried in that blatant case?

[00:26:22] Speaker 05:
Well, what about restricted output?

[00:26:24] Speaker 05:
You wouldn't be worried about that.

[00:26:25] Speaker 05:
You'd say there's an obvious price effect.

[00:26:28] Speaker 05:
that if the generics had come in three years earlier, the price would have been lower.

[00:26:31] Speaker 05:
That's the market power inquiry.

[00:26:33] Speaker 03:
It seems sort of circular, though.

[00:26:35] Speaker 03:
You're basically saying we know the market is just the brand and it's generic because there was a price drop.

[00:26:43] Speaker 03:
And therefore, because there's a price drop, that's the market.

[00:26:46] Speaker 03:
But how do we know that we don't have to look at the other drugs that are competing to define the market and figure out what the competitive price is?

[00:26:52] Speaker 03:
Because there could be other competing HIV drugs that are charging a similar price to the brand.

[00:26:56] Speaker 05:
To be clear, I'm not saying that you know it's the relevant market because of the price effect.

[00:27:01] Speaker 05:
It's the relevant market because that's the market that is being targeted.

[00:27:06] Speaker 05:
That's the competition that's being targeted by the alleged restraint.

[00:27:10] Speaker 05:
So that's, as Judge Sung was saying, that's the only competition or market that matters for purposes of this allegation.

[00:27:16] Speaker 05:
Whether there's market power depends on whether the patent had value or was worthless.

[00:27:21] Speaker 05:
And you can see that by whether it was able to charge price

[00:27:26] Speaker 03:
But market power in this narrow market that you've said you're only going to look at?

[00:27:31] Speaker 05:
It's charging the price in whatever market you want to put it at.

[00:27:35] Speaker 05:
It's charging that price.

[00:27:36] Speaker 03:
But whether it's super competitive depends on which market you're looking at.

[00:27:38] Speaker 05:
That's right.

[00:27:39] Speaker 05:
And the market you're looking at is the only market being challenged by this restraint is the competition between the brand and the generic.

[00:27:50] Speaker 05:
And if that competition didn't have a major price effect,

[00:27:54] Speaker 05:
then you would see that.

[00:27:55] Speaker 05:
You would see that there wasn't a huge drop when generic entry began.

[00:27:59] Speaker 05:
But it's undisputed here there was a 95% or 90 plus percent drop in that price.

[00:28:04] Speaker 01:
If I understand, I just want to make sure I understand.

[00:28:07] Speaker 01:
So I'm going to take it to drugs that I'm familiar with.

[00:28:12] Speaker 01:
Just as by analogy as a hypo, let's say allergy medicine, there's Claritin and there's Sudafed.

[00:28:20] Speaker 01:
And someone who has allergies might

[00:28:22] Speaker 01:
take one or the other, because they're both effective.

[00:28:26] Speaker 01:
But then there might be another someone who says, I prefer Claritin.

[00:28:31] Speaker 01:
It's more effective, or it doesn't make me sleepy, and I only choose Claritin.

[00:28:36] Speaker 01:
So in the world of allergy medicine, there's both some people who might choose one or the other, be brand indifferent, and then there's some people who really just want this particular type of allergy medicine.

[00:28:51] Speaker 01:
With respect to that, Claritin is going to be worried about competition with the other types of allergy, but they're also going to be worried about competition in the market of people who really only want this particular type of allergy medicine.

[00:29:03] Speaker 01:
They're going to be worried about the generic, because then they're only going to be competing in the sub-market of people who can only want Claritin, only use Claritin.

[00:29:15] Speaker 01:
They're only competition.

[00:29:18] Speaker 01:
is the generic.

[00:29:19] Speaker 01:
So you're saying when, for the purpose of determining whether this delay of the competition from generic, what we should be looking at is that sub-market.

[00:29:36] Speaker 01:
Because that's sub-market of people who really only want this particular drug.

[00:29:41] Speaker 01:
Their only competition is the generic.

[00:29:44] Speaker 01:
OK, and then maybe there might be a scenario in which A is really just not that effective.

[00:29:55] Speaker 01:
So if a generic is introduced, it's not going to change anything, because there aren't that many people who are preferring only A. But you would see that, essentially, when the generic was introduced, because essentially,

[00:30:10] Speaker 01:
Not much would happen to the price, because not that many people are preferring A over B based on price alone.

[00:30:21] Speaker 05:
That's exactly right.

[00:30:21] Speaker 05:
And I suspect you're clear to an example.

[00:30:25] Speaker 01:
Because when the generics were introduced here, there was such a big drop.

[00:30:29] Speaker 01:
You're saying that we can draw the inference.

[00:30:32] Speaker 01:
That must mean there was a market, a sub-market, where people only wanted A.

[00:30:39] Speaker 01:
As soon as A became available cheaper, they had to drop the price.

[00:30:45] Speaker 05:
That's exactly right.

[00:30:46] Speaker 05:
In the Claritin example, you probably wouldn't see a big drop because there is price competition between Claritin and Benadryl and the others.

[00:30:53] Speaker 05:
And it's the branding effect.

[00:30:56] Speaker 05:
People don't always buy a commodity for a retail consumer product like that, but for prescription drugs.

[00:31:02] Speaker 05:
The law requires the pharmacies to switch to the generic.

[00:31:05] Speaker 05:
So it is much more the whole regime here, the Hatch-Waxman regime, is designed and focused.

[00:31:11] Speaker 05:
And the Supreme Court says this in activists.

[00:31:13] Speaker 05:
And I really want this whole argument is rooted in activists.

[00:31:17] Speaker 05:
They didn't address market power as a motion to dismiss decision.

[00:31:20] Speaker 05:
But if one reads activists and thinks about the nature of this case, I think it's clear that it leads to this conclusion and to the conclusion you've articulated, Judge Sung.

[00:31:30] Speaker 05:
It talks about super competitive

[00:31:32] Speaker 05:
profits.

[00:31:33] Speaker 05:
And when it says super competitive, it means above the price that would occur with generic competition.

[00:31:39] Speaker 05:
Everything it says is about the competition between the brand and the generics.

[00:31:44] Speaker 05:
And if the price isn't higher, then fine.

[00:31:48] Speaker 05:
Then you're not going to see market power.

[00:31:49] Speaker 05:
But when it's 90% drop after the generics, you know the answer to the inquiry.

[00:31:55] Speaker 03:
We're over your time.

[00:31:56] Speaker 03:
Is your question answered or should I?

[00:31:58] Speaker 03:
I think so.

[00:31:59] Speaker 05:
You're well over your time.

[00:32:00] Speaker 05:
Can I quickly address question two then?

[00:32:03] Speaker 05:
May I?

[00:32:04] Speaker 03:
I think you're well over your time.

[00:32:05] Speaker 03:
I think we have to cut you off.

[00:32:07] Speaker 03:
Sorry.

[00:32:07] Speaker 03:
Thank you.

[00:32:31] Speaker 04:
Thank you, Judge Friedland.

[00:32:32] Speaker 04:
May it please the court, John O'Quinn, on behalf of the appellees.

[00:32:36] Speaker 04:
I want to start where the argument just finished and make two overarching points to begin with.

[00:32:41] Speaker 04:
First, procedural and then substantive.

[00:32:44] Speaker 04:
So the argument you just heard my friend make is an argument arguing this court should reverse the denial of summary judgment.

[00:32:51] Speaker 04:
That is procedurally inappropriate.

[00:32:52] Speaker 04:
It would violate the Seventh Amendment.

[00:32:54] Speaker 04:
It would be inconsistent with the Supreme Court's decisions in Ortiz and Dupree.

[00:33:00] Speaker 04:
both of which hold that the only thing that you can appeal from without having preserved this at J-Mall, and they did not raise this as a J-Mall issue, the only thing that you can appeal is a purely legal issue.

[00:33:11] Speaker 04:
Judge Chin rightly denied their motion for summary judgment in very well-reasoned opinion.

[00:33:16] Speaker 04:
I'd point you to excerpts of record 5792 and 5797 in which he talked about the evidence that there was competition between the brand drugs

[00:33:26] Speaker 04:
He explained that, quote, in the pharmaceutical context, there are reasons to be cautious about finding power just based on super competitive price, because a brand drug will always be more expensive, often for reasons that are not anti-competitive.

[00:33:40] Speaker 04:
End quote.

[00:33:40] Speaker 04:
He found, as this court recently reaffirmed in the Google Play case, that there are inherently, in determining what's in the market, all kinds of fact questions.

[00:33:51] Speaker 03:
So I think that you could view this as a purely legal question, though, because they're basically saying the price drop itself

[00:33:56] Speaker 03:
shows you that it was super competitive pricing, just as a matter of law.

[00:34:00] Speaker 03:
So if we just assume that for a second and get past the waiver, we understand your waiver argument.

[00:34:03] Speaker 03:
Could you address the merits of it?

[00:34:04] Speaker 04:
Yeah, I'll absolutely do that, Judge Friedland.

[00:34:07] Speaker 04:
One point on that, once it's actually gone to the jury, I think it'd violate the Seventh Amendment to then say, well, we can actually look at the summary judgment record.

[00:34:15] Speaker 04:
So I don't care, even if you dub this as being a pure question of law, it's still a question of law that was based on facts.

[00:34:22] Speaker 04:
And there was a factual record that was considered by the jury.

[00:34:25] Speaker 04:
Now, a couple of points on the facts here.

[00:34:29] Speaker 04:
Number one, plaintiff's position to treat the competitive price as being essentially marginal cost as a matter of law is an extraordinary proposition.

[00:34:41] Speaker 04:
No court has adopted that.

[00:34:43] Speaker 04:
The Agranox case that he cites is admittedly an outlier.

[00:34:46] Speaker 04:
Every other court to have considered the question has rejected it because they all understand that what it would mean is that every brand drug is then

[00:34:54] Speaker 04:
in a market of one.

[00:34:55] Speaker 04:
And the reason the brand drug would be in a market of one is because the generic doesn't have the R&D costs.

[00:35:01] Speaker 04:
The generic doesn't have the advertising costs.

[00:35:04] Speaker 04:
And to be clear, there's a little bit of a little misleading going on when there's the, I don't mean intentionally, but when there's the suggestion that the price dropped upon generic entry, it's true the generic price was significantly lower than the brand price.

[00:35:17] Speaker 04:
But to be clear, the brand price here for both Truvada and Atripla never dropped.

[00:35:23] Speaker 04:
You can look at excerpts of record 2813, that's volume 11, and also excerpts of record 2816.

[00:35:29] Speaker 04:
And I'd also point you to trial exhibit 8168, which is available at docket 2155-02, page 20.

[00:35:41] Speaker 04:
And what you can see is even after generic entry occurs,

[00:35:45] Speaker 04:
Gilead's price for Truvada stayed the same Gilead's price for a triplet stayed the same Probably almost no one was buying it right.

[00:35:53] Speaker 04:
I'm sorry I just probably almost no one was paying that price though because no one was buying it absolutely the demand dropped and that that actually then goes to why it would be That's actually emblematic of why it would be inappropriate to look at the market as just being limited to that drug and that's because the fact is

[00:36:10] Speaker 04:
After looking at 80 million prescriptions, 2 million patients, 11 years worth of data, as our expert Dr. Wu explained, they had real world switching happening between branded drugs.

[00:36:23] Speaker 04:
And what I'm referring to you can see at excerpts of record 2792 and supplemental excerpts of record 626.

[00:36:32] Speaker 04:
And what Dr. Wu testified at SER 622 is about what were people doing in real life.

[00:36:37] Speaker 04:
And what he explained was that Gilead for both of these drugs lost market share before generic entry.

[00:36:44] Speaker 04:
That's at SER 628.

[00:36:47] Speaker 04:
And indeed, they were sales by the time of generic entry.

[00:36:52] Speaker 04:
Truvada sales had dropped by 90% compared to the peak.

[00:36:56] Speaker 04:
Dropped by 90%.

[00:36:57] Speaker 04:
And so what you're seeing, and this goes to one of the questions you had a moment ago, Judge McEwen, what you're seeing is that there is vigorous competition that is taking place between a variety of different drugs, including, yes, there were other Gilead drugs, but there was drugs from Veev, drugs from GSK, and Dr. Wu testified about that.

[00:37:19] Speaker 04:
And that drop in market share, significant drop in market share, which predates a generic entry,

[00:37:25] Speaker 04:
shows that there, again, is at least a fact question about what is competition, what is the relevant market for competition.

[00:37:36] Speaker 02:
That's what I'm still wrestling with is what is the relevant market and how is it analyzed in what is here called a zero price market because of the unusual situation of the consumer.

[00:37:49] Speaker 02:
It's not, it's not Sudafed, it's not the over-the-counter.

[00:37:53] Speaker 02:
situation, it's this prescription drug at a zero price option.

[00:37:58] Speaker 02:
So where does that fit in?

[00:38:00] Speaker 04:
Yeah, Judge McKeown, I think you put your finger on it.

[00:38:03] Speaker 04:
It is, it is, this is an unusual situation because you are in

[00:38:07] Speaker 04:
Number one, it's a market with large sunk costs, which I talked about a moment ago.

[00:38:11] Speaker 04:
And number two, it is a heavily subsidized market.

[00:38:15] Speaker 04:
And Dr. Wu testified about this extensively at trial, explaining that the people who are making the decisions, the consumers, the ultimate beneficiaries here,

[00:38:26] Speaker 04:
a price wasn't the relevant consideration for them because they're either paying zero or like a five dollar copay or something along those lines and so that what you end up with is vigorous competition on other dimensions and the Supreme Court going on.

[00:38:41] Speaker 01:
I get confused about that because I thought part of the problem is when the generic is introduced, essentially health plans are requiring use the generic because it's cheaper.

[00:38:54] Speaker 01:
Yes.

[00:38:55] Speaker 01:
I mean, isn't that part of the problem of why the drug company doesn't want the generic?

[00:39:00] Speaker 01:
Because as soon as the generic is introduced, that generic is going to get dispensed?

[00:39:05] Speaker 04:
So Judge Sung, under many states' laws, you were right that if you have an AB therapeutically rated equivalent, a drug gets automatically substituted.

[00:39:19] Speaker 04:
And the benefit of that for generic companies

[00:39:23] Speaker 04:
Number one, they don't have to engage in the extensive R&D costs that are involved in innovating these types of lifesaving drugs.

[00:39:32] Speaker 04:
And number two, they don't have to engage in any advertising.

[00:39:35] Speaker 04:
It just automatically gets substituted in.

[00:39:37] Speaker 04:
And so we're in a very, very strange market.

[00:39:40] Speaker 04:
If we're talking about Coke and Pepsi, they're both out there vigorously competing along a lot of different dimensions, not just price, but there are differences in them.

[00:39:52] Speaker 04:
And when you have the substitution, that means that the generic can come in at a lower price as a function

[00:39:59] Speaker 04:
of state law, that's going to always be true.

[00:40:03] Speaker 04:
And so the upshot of the plaintiff's position, which the Supreme Court and activists didn't remotely suggest, is that you can just define a market of one just based on price drop.

[00:40:14] Speaker 04:
That would be an extraordinary proposition.

[00:40:17] Speaker 04:
No court has remotely suggested that.

[00:40:21] Speaker 04:
Activists didn't essentially say, you can do away with the inquiry into market power.

[00:40:26] Speaker 04:
And what I hear the plaintiffs arguing is essentially that you can do away with that inquiry.

[00:40:31] Speaker 04:
From the price drop alone, that's enough.

[00:40:35] Speaker 04:
That's inconsistent going all the way back to the Supreme Court's decision in DuPont.

[00:40:40] Speaker 04:
you know, which made clear that, you know, quote, in considering the relevant market for determining control of price and competition, no more definite rule can be declared than commodities reasonably interchangeable by consumers for the same purposes make up that market, end quote.

[00:40:56] Speaker 04:
And that's what you have here is you have reasonable interchangeability, not theoretical interchangeability, but what, and that was, you know, the Regeneron case in the Second Circuit was decided on a motion to dismiss

[00:41:08] Speaker 04:
It found that the district court had erred in dismissing, but it looked solely at theoretical interchangeability as opposed to actual interchangeability.

[00:41:16] Speaker 04:
Here we had a trial.

[00:41:17] Speaker 04:
We had a six-week trial about the actual interchangeability of drugs, about how the demand for Gilead's products, for these specific products dropped substantially.

[00:41:29] Speaker 04:
as a result of the introduction of these other products?

[00:41:33] Speaker 04:
That's ultimately a fact question.

[00:41:35] Speaker 04:
I mean, this court has emphasized again and again that ultimately what you're faced with in deciding what is the relevant market is no one test.

[00:41:45] Speaker 04:
Again, the plaintiffs put a lot of emphasis in the so-called SNP test.

[00:41:55] Speaker 04:
in several cases, including Optronic versus Ningbo, made the point, quote, there is no requirement to use any specific methodology in defining the relevant market.

[00:42:05] Speaker 04:
And, of course, the Supreme Court in Brown Shoe identified a number of practical factors.

[00:42:10] Speaker 04:
which were, how do consumers view the competing products?

[00:42:16] Speaker 04:
And here, the consumers are looking between Veev's products and Gilead's products and other Gilead products, how do the participants view the products?

[00:42:23] Speaker 04:
And you can see at ER 2,995,

[00:42:29] Speaker 04:
For example, Gilead identifying who were its competitors, GSK, BMS, and Merck.

[00:42:34] Speaker 04:
And that is exactly the point the Judge Chin, in his thoughtful opinion on this, in denying them summary judgment and allowing the issue to go to the jury, explained that there are a lot of complicated facts here, and that is exactly when it should go to the jury.

[00:42:49] Speaker 04:
And at the end of the day, the jury came to the conclusion

[00:42:52] Speaker 04:
a minimum that the plaintiffs had overreached.

[00:42:55] Speaker 04:
As Judge Chin put it at ER 41, they took an extreme position with respect to the market.

[00:43:00] Speaker 04:
And the jury ultimately found that they didn't carry their burden of proof.

[00:43:03] Speaker 04:
And I don't think there's a basis for this court to revisit that.

[00:43:06] Speaker 04:
Now, I do also want to say, and I'm happy to take questions on this, but I'm also happy to move on to other topics as well, there are two independent bases on which you can affirm the jury's verdict.

[00:43:17] Speaker 04:
The first one is that the court was right to allow the issue of market power to go to the jury, and the jury was properly instructed here.

[00:43:26] Speaker 04:
And to the extent you have any doubt about that, compare the actual jury instruction to the one that plaintiffs urged at ER 1100.

[00:43:33] Speaker 04:
The jury instruction that he gave on market power was more favorable to plaintiffs than frankly what they had been asking for, explaining that everything had to be through the lens of economic substitutability and what they complain about is language out of case law.

[00:43:52] Speaker 04:
But then you have an independent basis for affirming the jury's verdict, which is that there was in fact no reverse payment.

[00:44:00] Speaker 01:
Question to you, can you address the FTC's concerns?

[00:44:04] Speaker 01:
as expressed in their AMCAS brief?

[00:44:06] Speaker 04:
So Judge Soon, I will try to.

[00:44:09] Speaker 04:
I'm going to confess, I'm not entirely sure what the FTC's concerns are as applied to this case.

[00:44:14] Speaker 04:
And the reason that I say that is because the defendant's argument was that there was no payment at all.

[00:44:23] Speaker 04:
Not that it was small compared to some metric out there, but that there was no exclusivity, and so there was nothing of discernible value or substantial value that was conveyed.

[00:44:37] Speaker 04:
That's not an argument that the FTC really addresses, and in fact the FTC addresses a number of points

[00:44:45] Speaker 04:
frankly, that plaintiffs do not make in their brief and therefore are not actually really before the court on appeal, the FTC makes a number of comments about the relevance of patent merits.

[00:44:55] Speaker 04:
And to be sure, issues like causation and damages don't exist in FTC cases, but they do exist in private plaintiff cases.

[00:45:05] Speaker 04:
And patent merits, as the First Circuit explained in NXIVM and a number of district court cases have all explained,

[00:45:12] Speaker 04:
Patent merits are critical to determining the issues of causation and damages.

[00:45:17] Speaker 04:
Plaintiffs themselves put on days worth of experts about patent merits or lack thereof in their view.

[00:45:25] Speaker 04:
And there was a reason for that.

[00:45:26] Speaker 04:
And one last point that I think is different, at least from how the Supreme Court was looking at the issue in activists itself, is there's a question in this case, and the FTC doesn't grapple with this, about whether there was a payment at all.

[00:45:42] Speaker 04:
There was a payment.

[00:45:44] Speaker 04:
There was a question of what it was for and how to consider it.

[00:45:48] Speaker 04:
Would it be any competitive?

[00:45:50] Speaker 04:
The Supreme Court was just dealing with a motion to dismiss and saying, can these cases be actionable or does the scope of the patent test apply?

[00:45:57] Speaker 04:
Court concluded the scope of the patent test didn't apply.

[00:46:00] Speaker 04:
The question in this case was, was there a payment at all?

[00:46:06] Speaker 04:
And was it to induce delay?

[00:46:09] Speaker 04:
And the patent merits and what the but-for entry date would have been helped to illuminate the question of whether or not there was a payment at all.

[00:46:20] Speaker 02:
Let's just assume there is evidence of a payment.

[00:46:24] Speaker 02:
And so on this reverse payment,

[00:46:26] Speaker 02:
question and the jury instruction and leaving the FTC out of it.

[00:46:32] Speaker 02:
It seems to me there's two aspects to that, according to activists.

[00:46:36] Speaker 02:
There's the largeness or size question, and then there's the unjustified inquiry.

[00:46:44] Speaker 02:
And my question is whether those were collapsed here and whether that was error on the part of the district court.

[00:46:51] Speaker 04:
So they were not collapsed, and there's no error by the district court.

[00:46:56] Speaker 04:
First of all, you can't just assume there's a payment.

[00:46:59] Speaker 04:
That's what the whole case was about, Judge McEwen, was whether or not there was.

[00:47:04] Speaker 04:
And as I was saying, Pat Merritt's picking the buck for a date, knowing what it is, illuminates

[00:47:11] Speaker 04:
whether or not it took something to induce them to agree to a later date than that.

[00:47:15] Speaker 04:
So the patent merits were relevant.

[00:47:17] Speaker 04:
Now, your question about largeness and, you know, when you get to the issue of reverse payment, I think it's important to recognize plaintiffs didn't move for JMAW.

[00:47:26] Speaker 04:
They're not making any arguments about the sufficiency of the evidence.

[00:47:29] Speaker 04:
They're just quibbling about the jury instructions.

[00:47:31] Speaker 04:
They're not even saying that any of the jury instructions were wrong.

[00:47:34] Speaker 02:
Well, that was my question is, is there any challenge actually to the jury instructions?

[00:47:38] Speaker 04:
So their challenge is not that any of the jury instructions were legally wrong.

[00:47:42] Speaker 04:
Their challenge is that the district court would have, could have, should have said more.

[00:47:47] Speaker 04:
And the district court, I think, gave well-reasoned explanation for doing the jury instructions exactly the way that he did.

[00:47:53] Speaker 04:
and frankly rejected because he viewed some of their positions as loading the dice.

[00:47:58] Speaker 04:
So, for example, if you look on the question of large or largeness, if you look at what they had proposed, it's ER 1626, the district court rejected that at ER 493, that's in Volume 2, as being, quote, overly one-sided.

[00:48:14] Speaker 04:
And he recognized, as we argued, that it assumed the conclusion.

[00:48:19] Speaker 04:
The instruction that they wanted was to say, quote, you can find the total reverse payment here is large if dot, dot, dot.

[00:48:26] Speaker 04:
Well, the question is whether there was a reverse payment at all.

[00:48:29] Speaker 04:
And then second, their argument of it's large just compared to

[00:48:34] Speaker 04:
essentially avoided attorney's fees.

[00:48:36] Speaker 04:
That's inconsistent with the Third Circuit's decision in Wellbutrin, 868 F3 at 168, which identified that brand companies are going to be incentivized to pay more than just attorney's fees because of risk aversion.

[00:48:49] Speaker 04:
One is not a valid metric for the other.

[00:48:54] Speaker 04:
And so at the end of the day, their only complaint is to essentially say, well, large compared to what?

[00:48:59] Speaker 04:
And that's where I think

[00:49:01] Speaker 04:
First of all, large is a lay concept that a lay juror can understand.

[00:49:04] Speaker 04:
And second, this court's recent admonition in the Google Play store case recognizes that when you're considering whether the district court abused this discretion, you have to consider what were the theories at trial.

[00:49:19] Speaker 04:
Defendants were not arguing this was not large compared to some other metric.

[00:49:24] Speaker 03:
The verdict form doesn't have the word large in question, too.

[00:49:27] Speaker 03:
It just asks whether there was a payment.

[00:49:29] Speaker 04:
That's right.

[00:49:29] Speaker 04:
That's exactly right.

[00:49:31] Speaker 04:
And by the way, I mean, activists itself, yes, it talks about large payments, but it doesn't actually link that up to any one particular thing.

[00:49:39] Speaker 04:
It talks at different points in time.

[00:49:41] Speaker 04:
It refers to, quote, size as an independent consideration separate from, quote, scale in relation to future litigation costs.

[00:49:49] Speaker 04:
That's page 159 of the activist decision.

[00:49:52] Speaker 04:
And then without referring to size, it just notes that a payment, just a payment, it doesn't even talk about size, quote, may amount to more than a rough approximation, to no more than a rough approximation of litigation expenses.

[00:50:05] Speaker 04:
reflect compensation for other services, the generic as promised to perform, or there may be other justifications.

[00:50:11] Speaker 04:
That's at 157.

[00:50:12] Speaker 04:
There's nothing in activists that ties large to a single metric.

[00:50:16] Speaker 04:
And again, we were not arguing, the defendants were not arguing, well, this is not large compared to this, this is not large compared to that.

[00:50:23] Speaker 04:
The argument was, this is not a payment or it's not a payment of sufficient certainty

[00:50:28] Speaker 04:
of sufficient determinability to have had the effect that the plaintiffs wanted to allege.

[00:50:35] Speaker 04:
So again, either way, this case on what went to the jury is ultimately about the jury instructions.

[00:50:42] Speaker 04:
That's really the only thing that's properly preserved here.

[00:50:45] Speaker 04:
And the district court didn't commit any legal errors.

[00:50:48] Speaker 04:
And the district court would not remotely abuse his discretion in turning back some of the overreaches that plaintiffs wanted in the jury instructions.

[00:50:56] Speaker 03:
I'm happy to answer other questions, but I'd also like to... I was hoping to ask you to address the renal benefit issue and whether it affected all patients.

[00:51:03] Speaker 04:
Yeah, I'd be happy to, Judge Friedland.

[00:51:06] Speaker 04:
Let me take two steps back on that.

[00:51:07] Speaker 04:
First was, you know, I heard a suggestion from my friend that if you agree with them on the so-called TAF switching product hop issue, that that would require a new trial as to the reverse payment issue.

[00:51:19] Speaker 04:
First of all, that's not an argument that we saw in their brief.

[00:51:22] Speaker 04:
It certainly wasn't one that was developed in the way that this court required at Badgley at 957 F3rd at 978.

[00:51:32] Speaker 04:
Two sentences without citation to legal authority is not enough as this court has held.

[00:51:37] Speaker 04:
But I don't even understand the logic behind it.

[00:51:40] Speaker 03:
It has nothing to do with... Maybe this is because of the monopolistic scheme.

[00:51:43] Speaker 03:
I actually didn't ask them when they said it, but maybe it's because of that.

[00:51:46] Speaker 03:
argument that it's all bundled together?

[00:51:48] Speaker 04:
It might be that that's, so I'll break that apart.

[00:51:54] Speaker 04:
Certainly it would have no bearing on market definition, nor would it, whether there was reverse payment.

[00:52:01] Speaker 04:
Maybe it goes to the issue of whether or not there's a course of conduct

[00:52:04] Speaker 04:
a scheme that can be made here.

[00:52:06] Speaker 04:
There can't be because what they essentially, their whole theory here for scheme.

[00:52:14] Speaker 04:
I'd be happy to.

[00:52:15] Speaker 04:
No, no, absolutely would be happy to.

[00:52:18] Speaker 04:
And this is the other, the other step back on that is

[00:52:22] Speaker 04:
Of course, the whole question here is, what does a product hop theory actually require in the first place?

[00:52:27] Speaker 04:
They jumped right into arguing, oh, there was something that was misleading here.

[00:52:31] Speaker 04:
And I would definitely want to address that head on.

[00:52:33] Speaker 04:
But before you ever get to that as a legal matter, the question would be, does that matter?

[00:52:38] Speaker 04:
And I think if you look at the Second Circuit's decision in Namenda, this court's decision in Allied Orthopedic, and the Third Circuit's decision in a case called Mylan versus Warner-Chilcot, it's at 838.

[00:52:49] Speaker 04:
F3 at 440, they all require making the product actually unavailable.

[00:52:56] Speaker 04:
That's what you've got to have in order to have one of these product hop type schemes.

[00:53:01] Speaker 04:
Because otherwise you're just conflating fraud into antitrust law in kind of a boundless sort of way where you would be inviting exactly what this court said in allied orthopedic

[00:53:14] Speaker 04:
would be unmanageable, which is deciding, well, okay, have you over-marketed the product?

[00:53:22] Speaker 04:
Was it worth it for these changes to have been made in the first place?

[00:53:28] Speaker 03:
Respectfully... The notion that threatening that the product would become unavailable could be equivalent to being unavailable

[00:53:36] Speaker 03:
I'm not sure you really have to show that it was totally unavailable.

[00:53:40] Speaker 04:
I agree that the line is not that it's actually literally got to be gone from the market, but I think both in Naminda and in the Suboxone case, in both cases there was an announcement that the product was going to be withdrawn.

[00:53:55] Speaker 04:
And that had the effect of functionally rendering it unavailable.

[00:54:00] Speaker 04:
That was like a hard switch.

[00:54:02] Speaker 04:
That was the hard switch.

[00:54:03] Speaker 04:
That's exactly right.

[00:54:03] Speaker 04:
And the argument that I think you're hearing today is essentially an argument about why something that would be no more than what Naminda cast as a soft switch should be actionable as a matter of law.

[00:54:14] Speaker 04:
No case stands for that proposition.

[00:54:17] Speaker 04:
And indeed, I think that that would run afoul not only of what this court held in allied orthopedic,

[00:54:23] Speaker 04:
but also what the Supreme Court held in Pacific Bell.

[00:54:26] Speaker 04:
I mean, you're already at the outer edges of antitrust law with this theory.

[00:54:31] Speaker 04:
This product top theory is not one that's been recognized by the Supreme Court.

[00:54:34] Speaker 03:
Well, maybe this sort of gets back to the same thing.

[00:54:36] Speaker 03:
I think, as I recall, Allied Orthopedic talks about a product improvement.

[00:54:40] Speaker 03:
And so their claim is that you were misleading because it wasn't a product improvement.

[00:54:44] Speaker 03:
So what is the medical evidence about this, who was affected issue, and whether you said something misleading about that?

[00:54:50] Speaker 04:
Yeah, so let me point you to a few things on this, Judge.

[00:54:53] Speaker 04:
Judge Friedland first, you know, as Judge Chin recognized, there's nothing in the record that shows that the Gilead was saying anything substantially different from what the Department of Health and Human Services itself said.

[00:55:07] Speaker 04:
And indeed, there was a concession.

[00:55:10] Speaker 04:
You can see at supplemental excerpts of record 94, they've conceded that we didn't mislead the FDA, we didn't withhold data, that there were no errors in the data,

[00:55:21] Speaker 04:
at Excerpts of Record 96.

[00:55:24] Speaker 04:
They're not challenging the HHS guidelines at Supplemental Excerpts of Record 92.

[00:55:30] Speaker 04:
Their expert disclaimed, quote, objecting to the study design for Strybeld versus Genvoia at all at SER 102.

[00:55:38] Speaker 04:
They disclaimed any issue with the FDA approved labels.

[00:55:41] Speaker 04:
I mean, the comparison that was run here between Strybeld and Discovy was one that was

[00:55:49] Speaker 04:
or excuse me, Genvoia, between Stribil and Genvoia, is a study that was approved by FDA in order to get this drug approved in the first place.

[00:55:58] Speaker 04:
And indeed, plaintiffs themselves pled, they pled that TAF, quote, has a substantially lower incidence of significant adverse side effects.

[00:56:07] Speaker 04:
That's at ER 2239.

[00:56:09] Speaker 04:
So they really do want to put a court in the business of sort of second guessing, well, is it enough and for who?

[00:56:15] Speaker 04:
I do want to talk about the for who bit because

[00:56:18] Speaker 04:
They repeatedly rely on a Gilead document that identifies 17, I believe it's 17% is the number that they've quoted of people who were diagnosed with either of the conditions.

[00:56:35] Speaker 04:
100 their expert was questioned about this, and that 17% just goes to the number of people diagnosed.

[00:56:42] Speaker 04:
Diagnosed, of course, doesn't mean the number of people who actually need it.

[00:56:46] Speaker 04:
And if you look at the same document that they rely on, this is ER 5672, volume 23.

[00:56:55] Speaker 04:
It was a 2010 document.

[00:56:59] Speaker 04:
The estimated prevalence of these conditions, the kidney conditions and the bone demineralization,

[00:57:05] Speaker 04:
was 72% of the patient population.

[00:57:09] Speaker 04:
And so you really are basically being asked to

[00:57:12] Speaker 04:
I'm sorry, Judge Friedland.

[00:57:13] Speaker 03:
I mean, they seem to have a theory, though, that even if it's 72%, because there would still be a 28% if I'm doing the math right, that you needed to say that.

[00:57:21] Speaker 03:
And I'm wondering if you can speak to this idea that there should have been a way to identify who the people were who didn't need this.

[00:57:28] Speaker 04:
Yeah, Judge Friedland, I don't know that there's any way to know ex ante who those people would be.

[00:57:32] Speaker 04:
This was a point that Judge Chin made in granting summary judgment on this.

[00:57:38] Speaker 04:
Number one, these are drugs that are taken over a lifetime.

[00:57:41] Speaker 03:
Number two, when you talk about bone demineralization, you're talking about... Okay, but they said PrEP is not taken over a lifetime.

[00:57:46] Speaker 03:
Is that a dispute or...?

[00:57:49] Speaker 04:
So, I think there's... I don't know the answer to that question, Judge Friedland.

[00:57:59] Speaker 04:
I also don't think that it matters because at the end of the day, it's the same drug that is... And if you're saying it has benefits,

[00:58:07] Speaker 04:
it's the same drug that's going to be used for HIV treatment as it is being used for PrEP treatment.

[00:58:13] Speaker 04:
They don't identify any external Gilead marketing materials that make faults, that they accuse of making false statements.

[00:58:23] Speaker 04:
In fact, they don't really identify, they're expert, if you look at SER 101,

[00:58:28] Speaker 03:
I see I'm over my time.

[00:58:33] Speaker 03:
You say the standard is false.

[00:58:34] Speaker 03:
They say because you're talking about your own products, the standard should be misleading.

[00:58:37] Speaker 03:
I'm wondering if you have an argument that even if the standard is misleading, it's not misleading.

[00:58:43] Speaker 03:
I think that's... Oh, absolutely.

[00:58:44] Speaker 04:
I mean, there's no evidence of anyone having been misled here at all.

[00:58:51] Speaker 04:
I mean, if you look, for example, at SER 102, they conceded that there's no evidence that anyone made any changes that is in prescribing based on the study.

[00:59:04] Speaker 04:
If you look at SER 90 and 104, their expert conceded that doctors and patients were not coerced into making changes here.

[00:59:12] Speaker 04:
I mean, there's a lot that's sort of layered into this, Judge Friedland.

[00:59:15] Speaker 04:
One is, is it misleading?

[00:59:17] Speaker 04:
Two is, is it coercion?

[00:59:19] Speaker 04:
Three is, is coercion enough?

[00:59:21] Speaker 04:
I would submit that if you kind of work backwards, for exactly the reasons this court found an allied orthopedic, this cannot possibly be enough.

[00:59:31] Speaker 04:
And factually, their own experts, you can see at ER 6411, found that at the time of generic entry,

[00:59:41] Speaker 04:
As between.

[00:59:43] Speaker 04:
You know, as between Truvada and Discovy, you've got more than 50% of the population still using Truvada.

[00:59:53] Speaker 04:
Now, the whole theory here, again, take a step back.

[00:59:57] Speaker 03:
I think maybe I have to cut you off unless there are other questions.

[01:00:00] Speaker 03:
Thank you.

[01:00:00] Speaker 03:
I think we have your argument.

[01:00:01] Speaker 03:
Thank you very much.

[01:00:02] Speaker 03:
I think we still have some time for rebuttal, though.

[01:00:04] Speaker 03:
No, we don't.

[01:00:05] Speaker 03:
Or did anyone save time?

[01:00:06] Speaker 03:
I'm sorry.

[01:00:06] Speaker 03:
I don't remember.

[01:00:07] Speaker 03:
Did they use up their time?

[01:00:10] Speaker 03:
Yeah, let's give three minutes for rebuttal.

[01:00:13] Speaker 06:
Thank you, Judge Friedland.

[01:00:14] Speaker 03:
Thank you.

[01:00:17] Speaker 06:
I should say that if it's total, then I will try to use two minutes so that Mr. Hume can have a minute.

[01:00:24] Speaker 06:
We did try to reserve, I'm not trying to, I guess I am trying to.

[01:00:29] Speaker 03:
I actually have lost track of what happened here.

[01:00:33] Speaker 03:
We took everyone over their time.

[01:00:36] Speaker 03:
Why don't we give you two minutes and then we'll put two minutes again.

[01:00:39] Speaker 06:
That's great.

[01:00:40] Speaker 06:
Thank you so much, Your Honor.

[01:00:41] Speaker 06:
I do appreciate it.

[01:00:42] Speaker 06:
So I do want to address a couple of things that Mr. O'Quinn said at the end.

[01:00:47] Speaker 06:
The first one is with regard to the issue of whether, if the issue about the product hop has to go back, why there has to be a new trial that's addressed at pages 52 to 54 of our brief.

[01:00:59] Speaker 06:
And Gilead did not contest that in their responsive brief.

[01:01:03] Speaker 03:
But is it because of the monopolistic scheme?

[01:01:05] Speaker 06:
There's a few reasons, Your Honor.

[01:01:06] Speaker 06:
The easiest way to see it is that it's a different market.

[01:01:09] Speaker 06:
We said that there was monopolization of the overall market for cart drugs, and part of the conduct that effectuated that

[01:01:17] Speaker 06:
was the pay for delay.

[01:01:19] Speaker 06:
And so the market that was at issue would have been different.

[01:01:23] Speaker 06:
And the other thing is that because TAF was kept out of that trial, Gilead said, oh, TAF is terrific.

[01:01:30] Speaker 06:
TAF, we switched people to TAF.

[01:01:32] Speaker 06:
That shows there's competition.

[01:01:33] Speaker 06:
That shows that we're innovating.

[01:01:35] Speaker 06:
And had they been defending the misleading statements with regard to TAF in the trial, that would have obviously been.

[01:01:41] Speaker 01:
If I understand correctly, part of the defense was by the time the generics came in, there had already been a drop.

[01:01:47] Speaker 01:
drop in the usage, and you're saying that drop was because of the product hub.

[01:01:53] Speaker 06:
Exactly right.

[01:01:53] Speaker 06:
Yes, Your Honor.

[01:01:54] Speaker 06:
And I do want to quickly address the DHHS guidance, because obviously that was emphasized.

[01:02:02] Speaker 06:
What the DHHS guidance actually says is that TAF has fewer bone and kidney toxicities

[01:02:09] Speaker 06:
whereas TDF is associated with lower lipid levels, safety cost and access are among the factors to consider in the prescription decision.

[01:02:22] Speaker 06:
So that's quite different from saying

[01:02:24] Speaker 06:
that it's a safer drug for all patients.

[01:02:27] Speaker 06:
And there was a statement that there was no evidence about marketing to PrEP patients.

[01:02:32] Speaker 06:
That's not true.

[01:02:34] Speaker 06:
If you look at Mr. Hardy's expert report, he reviews some of the documents on their website.

[01:02:40] Speaker 06:
And this, again, it is revealed in their internal documents about what they were doing.

[01:02:45] Speaker 06:
The actual evidence of misrepresentations made to providers and patients, well particularly providers, may be thin, but that's for reasons that Dr. Hardy explained.

[01:02:57] Speaker 06:
This was marketing that was done by word of mouth,

[01:03:00] Speaker 06:
through key opinion leaders in the community.

[01:03:04] Speaker 06:
And so it's appropriate for a jury to draw the inference that precisely what they said they were going to do, which is to represent... I think we understand the argument.

[01:03:12] Speaker 03:
You're over your time, so if we're going to give your colleague time, we should have to stop.

[01:03:18] Speaker 05:
Thank you, Your Honors.

[01:03:20] Speaker 05:
Counsel mentioned the Google Play Store case.

[01:03:22] Speaker 05:
It's directly on point on this question of market definition.

[01:03:26] Speaker 05:
At page 935 of that opinion, this court held that the nature of the claim affects the market definition.

[01:03:33] Speaker 05:
There was a complaint by Google that Epic had a totally different market definition when it sued Google than when it sued Apple.

[01:03:41] Speaker 05:
And the court said, that's OK, because the theory of harm is different.

[01:03:44] Speaker 05:
And the definition of the market and the market power inquiry depends on the nature of the claim.

[01:03:50] Speaker 05:
That's at page 935 of the Google Play Store decision.

[01:03:53] Speaker 05:
Here, the claim is a pay for delay to delay generic competition.

[01:03:57] Speaker 05:
So the market power inquiry is, would the pay for delay, if proven, have anti-competitive effects?

[01:04:07] Speaker 05:
The answer to that question is given by what happens when generic entry actually occurs.

[01:04:14] Speaker 05:
There's actual data that gives you the answer.

[01:04:16] Speaker 05:
If there's a drop in the prevailing price, and it is the prevailing price, not just the price of the generics, take it all into account.

[01:04:23] Speaker 05:
That's why I mentioned not just the 90 plus percent price drop, but that most of the sales went generic.

[01:04:29] Speaker 05:
That tells you the prevailing price.

[01:04:31] Speaker 05:
And it dropped dramatically.

[01:04:33] Speaker 05:
Where under those undisputed facts, market power is shown.

[01:04:38] Speaker 05:
that's the basic on page 159 to 60 activists Supreme Court said lower courts will figure this out under the rule of reason.

[01:04:47] Speaker 05:
And they will Taylor it's a sliding scale of reasonableness the court has to separate out what's relevant to what's not relevant.

[01:04:55] Speaker 05:
That is not happening.

[01:04:58] Speaker 05:
We need this court's help to make sure it happens.

[01:05:00] Speaker 05:
There's the combination

[01:05:02] Speaker 05:
of the complexity of antitrust law and the fact that most cases are very different from this fact pattern, plus very talented defense lawyers, has led to a hopeless quagmire on this issue of market power.

[01:05:18] Speaker 05:
Agrinox gets it right.

[01:05:20] Speaker 05:
Zedia and the Lydoderm case get it right, but they're not as clear as Agrinox.

[01:05:25] Speaker 05:
Final point, if this court is not going to see its way clear to adopting the clear rule of law and reversing on market power, to avoid making the problem worse, we would ask the court to try to decide the market power issue on the narrowest, most case-specific grounds possible, a procedural ground.

[01:05:45] Speaker 05:
Finally, there would talk about instructions.

[01:05:48] Speaker 05:
the key point sorry if you want to lose on waiver then if you're going to lose is that what you're saying basically we don't want to lose we think those arguments have no merit I just this case is going to have implications beyond just this decision will have implications beyond this case that's all I meant to

[01:06:04] Speaker 05:
to emphasize, Your Honor.

[01:06:06] Speaker 05:
On instructions, the Sida Bay Court, Sutter Health, which reversed a jury verdict, says on page 68, 88, and 695 that it's the cumulative effect of all the instructions.

[01:06:19] Speaker 05:
There was an error in the instruction on large.

[01:06:23] Speaker 05:
It's found at ER 492 to 493, where the court failed to tell the jury that the payment is large

[01:06:31] Speaker 05:
if it's greater than avoided litigation costs.

[01:06:33] Speaker 03:
But that has to be- How do you deal with the fact that the verdict form just asks whether there was a payment at all and the jury says no?

[01:06:37] Speaker 03:
No.

[01:06:38] Speaker 05:
Sure.

[01:06:39] Speaker 05:
It would ask whether there was a payment to delay, which for that they had to look at all the instructions to understand that.

[01:06:47] Speaker 05:
But the larger point, the cumulative effect of all the instructions that we challenge in our appeal, was to convert a case that should have been about was there a payment and if so, why?

[01:06:59] Speaker 05:
instead became a case about, was it reasonable for Teva to settle?

[01:07:04] Speaker 05:
Was Teva concerned about losing the patent case?

[01:07:06] Speaker 02:
If the only issue was the jury instruction related to the large and justified, would that merit a reversal in a new trial?

[01:07:15] Speaker 05:
Yes, it would.

[01:07:16] Speaker 05:
If it were only that one issue?

[01:07:18] Speaker 05:
Yes.

[01:07:19] Speaker 05:
Well, I think it would because it's so central to the activist inquiry.

[01:07:22] Speaker 05:
And it creates an objective test that focuses the jury on the central question.

[01:07:27] Speaker 05:
Instead of which, but the cumulative effect here, and I want to just very briefly emphasize the waiver, the cumulative effect of the instructions with the evidentiary rulings.

[01:07:36] Speaker 05:
The court said on ER 2592 that it recognized the subjective testimony of the Teva

[01:07:43] Speaker 03:
House counsel who testified under the privilege waiver was not okay I think we're way beyond here you're beyond your time and now beyond the topic so I think I'll cut you off thank you both sides for the very helpful arguments this case is submitted and we are adjourned for the day