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Douglas Bernheim's analysis cited extensively in court decision on permanent injunction

May 21, 2010

Dr. Douglas Bernheim testified on behalf of Amgen in Amgen v. F. Hoffman-La Roche to advise the court considering whether to grant a permanent injunction against Roche’s sales and marketing of a product that infringes Amgen’s patents. The judge issued a court order that agreed with Dr. Bernheim’s conclusions and cited his testimony extensively.

In 2007, a federal court found that a drug Hoffman-La Roche intended to sell in the United States infringed certain patents held by Amgen. Following the jury verdict, the judge scheduled a four-day hearing to determine whether Amgen should be granted a permanent injunction preventing Roche from selling its drug in the United States. Counsel for Amgen retained Bates White to provide an economic opinion on the four factors described in the US Supreme Court’s opinion in eBay Inc. v. MercExchange, L.L.C. relevant to the Court’s determination of whether to grant the permanent injunction:

  1. Harms Amgen would suffer if Roche were permitted to sell its drug in the United States
  2. Whether monetary damages would be adequate to compensate Amgen for those harms
  3. How the burdens an injunction would impose on Roche would compare with Amgen’s harms if Roche were not enjoined
  4. Whether the public interest would be disserved if the injunction were entered by the Court

Since the drugs at issue are primarily covered by Medicare Part B, the Bates White team, led by Bates White Partner Douglas Bernheim, performed a detailed analysis of the economic incentives created by Medicare’s Average Selling Price (ASP) reimbursement system for entrant and incumbent drug manufacturers. The team developed innovative game theory models of competition under the ASP reimbursement system to predict pricing strategies that Roche and Amgen likely would employ should Roche be permitted to enter the US market. The predictions were shown to be consistent with the parties’ business planning documents and ultimately helped the court understand the consequences of the strategies. In conjunction with this analysis, Bates White developed a historical data set of pricing information from the Centers for Medicare and Medicaid Services (CMS) to analyze the pricing decisions of previous entrants and incumbents in a variety of therapeutic segments under the ASP system.

On the basis of these analyses, Dr. Bernheim concluded that, unlike typical competition described in economics textbooks, under Medicare’s reimbursement policies, Roche’s entry would likely result in higher prices and increased Medicare expenditures. Dr. Bernheim also testified that Roche’s entry would cause substantial recurring harm to Amgen that would not be adequately compensated by monetary damages and that Amgen’s harms would outweigh any burden on Roche stemming from the permanent injunction.

After a lengthy review, the judge issued a court order that agreed with Dr. Bernheim’s conclusions and cited his testimony extensively. Our client obtained a favorable outcome with the court issuing a permanent injunction against Roche.