FTC Gets Aggressive with its Subpoena Powers against Pharma Companies

The FTC recently took action to enforce a subpoena against a pharmaceutical company related to its investigation into the firm’s settlement of patent litigation.  Pharma companies are likely familiar with the FTC’s intent to stop patent settlements that it believes involve payments from the brand to the generic in exchange for delaying entry of the generic, but inside counsel should be aware that in pursuit of this goal, the FTC is issuing subpoenas and seeking to strictly enforce its production requirements.  Firms should:

  • Understand the protections and limits of privilege for attorney-client communications and work product doctrine;
  • Appropriately label communications or material as an “attorney-client communication”, “prepared at the request of counsel”, “joint defense communication”, or “prepared in anticipation of litigation”;
  • Be diligent about documenting requests from attorneys for internal company analysis and distinguishing the materials produced in response to attorney requests from otherwise ordinary course documents;
  • Understand that non-compliance with a subpoena may be challenged and be prepared to demonstrate the unavailability of or substantial burden associated with full compliance.
A Magistrate Judge in district court in D.C. ruled on the FTC claims that: 1) the party under investigation improperly withheld documents under claims of work product doctrine and attorney-client privilege, and 2) the party’s response was legally inadequate for failure to preserve its electronic records and refusing to restore and search back-up tapes. After an exhaustive in camera review of numerous documents, the Magistrate issued an initial order confirming that in most cases the company had properly withheld documents on the basis of the work product doctrine or attorney-client privilege. For example, the magistrate concluded that certain financial analyses were properly withheld – even though financial analyses are often undertaken in the normal course of business – because in this particular case there was evidence that they were prepared specifically to be used in considering a possible litigation settlement. Moreover, the FTC had not shown that it had an over-riding need for such documents, and there was no way to disclose the financial analyses without also revealing the attorneys’ thought processes.  On the second issue, the Magistrate required the company to search back-up tapes for a much more limited period that was relevant to the FTC investigation, instead of the lengthy time period originally requested by the FTC.  The FTC’s action in this matter highlights the aggressive position the agency is taking with respect to investigating pharmaceutical patent settlements.  Firms that are served with subpoenas or civil investigative demands from the FTC should pay close attention to their claims of privilege and use of redactions, and should be prepared to substantiate any claims that an FTC request is overly burdensome.  When parties do the work upfront to thoroughly vet their privilege issues and to demonstrate the burden associated with production, they build credibility with the agencies and with the courts which can go a long way toward resolving discovery disputes in a favorable manner.  

Back to main blog

Related blog posts

Loading data