Post on 01-May-2020
THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT __________________________________________________________________________________________________________
Nos. 18-2621, 18-2748, and 18-2758
__________________________________________________________________________________________________________
FEDERAL TRADE COMMISSION,
Plaintiff-Appellant,
v.
ABBVIE, INC. et al.,
Defendants-Appellees.
__________________________________________________________________________________________________________
On Appeal From The United States District Court
For The Eastern District of Pennsylvania
C.A. No. 2:14-cv-5151, Hon. Harvey Battle III __________________________________________________________________________________________________________
BRIEF OF AARP AND AARP FOUNDATION
AS AMICI CURIAE IN SUPPORT OF APPELLANT/CROSS-APPELLEE
FEDERAL TRADE COMMISSION
__________________________________________________________________________________________________________
William Alvarado Rivera*
Maame Gyamfi
AARP FOUNDATION
601 E Street, NW
Washington, DC 20049
(202) 434-3392
warivera@aarp.org
*Counsel of Record
Counsel for Amici Curiae
i
CORPORATE DISCLOSURE STATEMENTS AND
STATEMENTS OF FINANCIAL INTEREST
The Internal Revenue Service has determined that AARP is organized and
operated exclusively for the promotion of social welfare pursuant to Section
501(c)(4) of the Internal Revenue Code and is exempt from income tax. The
Internal Revenue Service has determined that AARP Foundation is organized and
operated exclusively for charitable purposes pursuant to Section 501(c)(3) of the
Internal Revenue Code and is exempt from income tax. AARP and AARP
Foundation are also organized and operated as nonprofit corporations under the
District of Columbia Nonprofit Corporation Act.
Other legal entities related to AARP and AARP Foundation include AARP
Services, Inc., and Legal Counsel for the Elderly. Neither AARP nor AARP
Foundation has a parent corporation, nor has either issued shares or securities.
ii
TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENTS
AND STATEMENTS OF FINANCIAL INTEREST ..............................................i
TABLE OF AUTHORITIES ................................................................................. iii
INTERESTS OF AMICI CURIAE .......................................................................... 1
SUMMARY OF ARGUMENT ............................................................................... 3
ARGUMENT ........................................................................................................... 6
I. FTC’s Section 13(b) Redress Authority Is Indispensable In The
Fight Against Inflated Prescription Drug Prices And Consumer
Fraud, Both Of Which Disproportionately Impact Older
Americans ...................................................................................................... 6
A. Older Adults Are Particularly Vulnerable To Harms
Caused By Anticompetitive Prescription Drug Price-
Inflation Schemes ................................................................................ 6
B. The FTC’s Section 13(b) Redress Authority Has Been
Indispensable In The Fight Against Consumer Fraud And
Deception Impacting Older Americans ............................................. 10
II. The Alternative Monetary Relief Provisions In The FTC Act Are
No Substitute For Section 13(b) Redress Authority In The Fight
Against High Prescription Drug Prices And Consumer Deception ............ 14
CONCLUSION ...................................................................................................... 16
CERTIFICATE OF SERVICE .............................................................................. 17
CERTIFICATE OF COMPLIANCE WITH RULE 32(a) AND L.A.R.
31.1(c) .................................................................................................................... 18
iii
TABLE OF AUTHORITIES
Cases
FTC v. AbbVie Inc., 329 F. Supp. 3d 98 (E.D. Pa. 2018) ....................................6, 16
FTC v. Actavis, 133 S. Ct. 2223 (2013) ..................................................................... 9
FTC v. AT&T Mobility, LLC, No. 1:14-cv-3227-HLM
(N.D. Ga. Oct. 8, 2014) .......................................................................................11
FTC v. Bronson Partners, LLC 654 F.3d 359 (2d Cir. 2011)..................................15
FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1 (1st Cir. 2010) .............................11
FTC v. Febre, 128 F.3d 530 (7th Cir. 1997) ............................................................11
FTC v. Lumos Labs, Inc., No. 3:16-cv-00001-sk
(N.D. Ca. Jan. 8, 2016) .......................................................................... 10, 13, 15
FTC v. NetSpend, No. 1:16-CV-4203 (N.D. Ga. Apr. 10, 2017) ............................11
FTC v. Next-Gen, Inc., No. 4:18-CV-0128-DGK
(W.D. Mo. Mar. 7, 2019) ............................................................................. 12, 15
FTC v. Magazine Sols., LLC, 432 F. App’x 155 (3d Cir. 2011) ............................... 5
FTC v. Ross, 743 F.3d 886 (4th Cir. 2014) ..............................................................11
FTC v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312 (8th Cir. 1991) ................11
FTC v. Sensa Products, 2014 U.S. LEXIS 183291 (N.D. Ill. 2014) .......................12
FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431 (11th Cir. 1984) ..............................11
FTC v. Volkswagen Group of Am., Inc., No. 3:15-md-02672
(N.D. Cal. June 27, 2016) ...................................................................................11
FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020 (7th Cir. 1988) ........11
Mylan Pharma. v. Warner Chilcott, 838 F.3d 421 (3d Cir. 2016) ............................ 1
Wyeth v. Levine, 555 U.S. 555 (2009) ....................................................................... 1
iv
Statutes, Rules and Regulations
Federal Trade Commission Act of 1914
15 U.S.C. § 45(b) .................................................................................................. 2
15 U.S.C. § 57b ..................................................................................................... 5
15 U.S.C. §§ 57b(a), (b) ..................................................................................5, 15
16 C.F.R. § 310 ........................................................................................................15
Legislative History
Drug Pricing in America: A Prescription for Change, Part I, Hearing
Before the S. Finance Comm., 116th Cong. 3 (Jan. 29, 2019)................................ 7
Lowering Prescription Drug Prices: Deconstructing the Drug Supply Chain:
Hearings Before the Subcomm. on Health of the H. Comm. on Energy &
Commerce, 116th Cong. 3 (2019), https://energycommerce.house.gov
/sites/democrats.energycommerce.house.gov/files/documents/Leigh%20Pu
rvis%20Testimony%20for%20EC%20Health%20Sub%20Hearing%20M
ay%209%202019.pdf ........................................................................................ 2, 7
Protecting Consumers from False and Deceptive Advertising of
Weight-Loss Products: Hearing Before Subcomm. on Consumer Prot.,
Prod. Safety, & Ins. Of the S. Comm. on Commerce, Science, and Transp.,
113th Cong. 3 (2014), https://www.ftc.gov/system/files/documents/
publicstatements/316321/140617falsedecepweightloss.pdf ............................... 11
Protecting Older Americans from Financial Exploitation: Hearing Before
S. Spec. Comm. on Aging, 114th Cong. 4 (2016), https://www.ftc.gov
/public-statements/2017/02/prepared-statement-federal-trade-commission-
stopping-senior-scams ............................................................................................. 3
Other Authorities
2018 FTC Annual Report on Refunds to Consumers, https://www.ftc.gov/
system/files/documents/reports/2018-annual-report-refunds-consumers/
annualredressreport2018.pdf .................................................................................10
2019 Generic Drug and Biosimilars Access and Savings in the U.S., Ass’n
for Accessible Meds., https://accessiblemeds.org/resources/blog/2019-
generic-drug-and-biosimilars-access-savings-us-report ......................................... 9
v
AARP, Why Drugs Cost So Much, AARP Bulletin, May 2017, https://www
.aarp.org/content/dam/aarp/health/healthy-living/2017/04/drug-prices-down
load-final.pdf .................................................................................................. 4, 8, 9
Amer. Coll. Prev. Med. Medication Adherence – Improving Health Outcomes
6 (2011), http://c.ymcdn.com/sites/www.acpm.org/resource/resmgr/timetools-
files/adherenceclinicalreference.pdf ....................................................................... 8
Applied Research & Consulting LLC, Financial Fraud and Fraud
Susceptibility in the United States 18 (Sept. 2013), https://www.saveand
invest.org/sites/default/files/Financial-Fraud-And-Fraud-Susceptibility-
In-The-United-States.pdf ........................................................................................ 4
Council of Economic Advisors, The Administration’s FDA Reforms and
Reduced Biopharmaceutical Drug Prices 10 (Oct. 2018), https://www.
white house.gov/wp-content/uploads/2018/10/The-Administrations-FDA-
Reforms-and-Reduced-Biopharmaceutical-Drug-Prices.pdf .................................. 9
Fed. Trade Comm’n, Consumer Sentinel Network: Data Book 2018 4
(Feb. 2019), https://www.ftc.gov/system/files/documents/reports/
consumer-sentinel-network-data-book-2018/consumersentinelnetwork
databook20180.pdf ................................................................................................14
Fed. Trade Comm’n, Pay for Delay: How Drug Company Pay-Offs Cost
Consumers Billions 2 (Jan. 2010), http://www.ftc.gov/sites/default/files
/documents/reports/pay-delay-how-drug-company-pay-offs-cost-consumers-
billions-federal-trade-commission-staff-study/100112payfordelayrpt.pdf ..........10
Fed. Trade Comm’n, Protecting Older Consumers (2017-2018): A Report
of the Federal Trade Commission 1, https://www.ftc.gov/system/files/
documents/reports/protecting-older-consumers-2017-2018-report-congress-
federal-trade-commission/protectingolderconsumers-ftcreport10-18-18.pdf ......13
Generic Competition and Drug Prices, Food & Drug Admin.,
https://www.fda.gov/about-fda/center-drug-evaluation-and-research/generic-
competition-and-drug-prices (last updated Nov. 20, 2017) .................................... 9
Aurel O. Iuga & Maura J. McGuire, Adherence and Health Care Costs,
7 Risk Mgmt. & Healthcare Pol’y 35 (2014) ........................................................ 8
Leading the Fight to Stop Rx Greed, AARP (Mar. 25, 2019, 2:24PM),
https://blog.aarp.org/aarp-media-relations/leading-the-fight-to-stop-rx-greed ...... 7
vi
Press Release, FTC Returns More than $10 Million to NetSpend Customers
(Sept. 17, 2018), https://www.ftc.gov/news-events/press-releases/2018/09/
ftc-returns-more-10-million-netspend-customers .................................................12
Press Release, FTC Sends Refund Checks Totaling More Than $26 Million
to Consumers Who Bought Sensa Weight-Loss Supplement (Dec. 10, 2014) .....12
Press Release, Lumosity to Pay $2 Million to Settle FTC Deceptive
Advertising Charges for Its “Brain Training” Program (Jan. 5, 2016),
https://www.ftc.gov/news-events/press-releases/2016/01/lumosity-pay-
2-million-settle-ftc-deceptive-advertising-charges ...............................................13
Press Release, Operators of Sweepstakes Scam Forfeit $30 Million to Settle
FTC Charges (Mar. 7, 2019), https://www.ftc.gov/news-events/press-
releases/2019/03 /operators-sweepstakes-scam-will-forfeit-30-million-settle
-ftc .................................................................................................................. 12, 13
Public Opinion on Prescription Drugs and Their Prices, Kaiser Family
Found. (July 15, 2019), https://www.kff.org/slideshow/public-opinion-
on-prescription-drugs-and-their-prices/ .............................................................. 7, 8
Charles Roehrig, Projections of the Prescription Drug Share of National
Health Expenditures Including Non-Retail (May 2018) ......................................... 7
Senate Spec. Comm. on Aging, Fighting Fraud: Senate Aging Committee
Identifies Top 10 Scams Targeting Our Nation’s Seniors, https://www.
aging.senate.gov/fraudbook/index.html ................................................................14
Stephen W. Schondelmeyer & Leigh Purvis, Trends in Retail Prices of
Brand Name Prescription Drugs Widely Used by Older Americans: 2017
Year-End Update 3 (Sept. 2018), https://www.aarp.org/content/dam/aarp/
ppi/2018/09 /trends-in-retail-prices-of-brand-name-prescription-drugs-year
-end-update.pdf ...................................................................................................4, 7
Stop Rx Greed, AARP, https://www.aarp.org/politics-society/advocacy
/prescription-drugs/?CMP=RDRCT-ADV-POLT-022519 .................................... 2
Thomas H. Wroth & Donald E. Pathman, Primary Medication Adherence
in a Rural Population: The Role of the Patient-Physician Relationship and
Satisfaction of Care, 19 J. Am. Board Fam. Med. 478 (2006) ............................... 8
1
INTERESTS OF AMICI CURIAE1
AARP is the nation’s largest nonprofit, nonpartisan organization dedicated
to empowering Americans 50 and older to choose how they live as they age. With
nearly 38 million members and offices in every state, the District of Columbia,
Puerto Rico, and the U.S. Virgin Islands, AARP works to strengthen communities
and advocate for what matters most to families, with a focus on financial stability,
health security, and personal fulfillment. AARP’s charitable affiliate, AARP
Foundation, works to end senior poverty by helping vulnerable older adults build
economic opportunity and social connectedness.
AARP and AARP Foundation advocate for the economic security and health
of older Americans, including through participation as amici curiae in state and
federal courts. E.g., Wyeth v. Levine, 555 U.S. 555 (2009); Mylan Pharma. v.
Warner Chilcott, 838 F.3d 421 (3d Cir. 2016).
AbbVie, Inc., Abbott Laboratories, Unimed Pharmaceuticals, and Besins
Healthcare Inc. (collectively, “Defendants-Appellees”) have asked this Court to
rule that the Federal Trade Commission (“FTC”) lacks the authority to obtain
redress for consumers in permanent injunction actions brought under Section 13(b)
1 No counsel for the parties authored this brief, in whole or in part. No counsel or
party made a monetary contribution intended to fund the preparation or submittal
of this Brief. All parties have consented to the filing of the brief.
2
of the FTC Act.2 In doing so, they ask the FTC relinquish one of its most
important equitable tools in two battles of extreme concern to older Americans –
the fight against rising prescription drug prices and the fight against consumer
fraud and deception.
On the prescription drug front, Defendants-Appellees’ unfounded plea
comes at a time when the FTC’s authority to seek redress is needed more than
ever. Amici, in court filings, Congressional testimony, and the Stop RX Greed
campaign,3 have sounded the alarm that older Americans – especially those on low
or moderate fixed incomes – are facing enormous challenges trying to pay for
prescription drugs at a time when prices are rising two or three times the rate of
inflation. Amici also have warned that drug company antitrust violations blocking
generic drug competition, as here, are a significant cause of this crisis.4
Second – and equally important – Defendants-Appellees implicitly seek to
eliminate one of the FTC’s most powerful remedial tools for protecting older
Americans from consumer fraud and deception. Amici have worked strenuously to
2 15 U.S.C. § 45(b) (2016). See also AbbVie Br. 73-79; Besins Br. 10, 18. 3 Stop Rx Greed, AARP, https://www.aarp.org/politics-
society/advocacy/prescription-drugs/ (last visited July 23, 2019). 4 See, e.g., Lowering Prescription Drug Prices: Deconstructing the Drug Supply
Chain: Hearings Before the Subcomm. on Health of the H. Comm. on Energy &
Commerce, 116th Cong. 3 (2019) (testimony of Leigh Purvis on Behalf of AARP),
https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/fil
es/documents/Leigh%20Purvis%20Testimony%20for%20EC%20Health%20Sub%
20Hearing%20May%209%202019.pdf.
3
protect consumers through education, AARP’s national Fraud Watch Network
Helpline, and other efforts. However, Amici recognize that vigorous law
enforcement is indispensable in this fight. The FTC over three decades has
vigorously exercised its Section 13(b) redress authority to return many millions of
dollars in redress to older adults. The cases range from the telemarketing schemes
of the early 1980’s to today’s deceptive claims on the internet promising cures for
dementia and other age-related illnesses.5 AARP and AARP Foundation submit
this brief to advise the Court about the larger consequences for older Americans if
this Court reverses three decades of settled law holding that the FTC is empowered
to seek consumer redress in such actions.
SUMMARY OF ARGUMENT
Defendants-Appellees’ contention that the FTC lacks authority to seek
redress under Section 13(b) has negative implications far beyond the confines of
this case. First, the FTC, in this circuit, would lose one of its most critical
equitable powers in the general battle against antitrust schemes that raise drug
prices. Older Americans, in particular, have suffered as the prices of the most
5 See, e.g., Protecting Older Americans from Financial Exploitation: Hearing
Before S. Spec. Comm. on Aging, 114th Cong. 4 (2016) (statement of Lois
Greisman, Assoc. Dir. of Mktg. Practices, Bureau of Consumer Prot., Fed. Trade
Comm’n), https://www.ftc.gov/public-statements/2017/02/prepared-statement-
federal-trade-commission-stopping-senior-scams.
4
popular brand name drugs rose 208% between 2008 and 2016.6 In some instances,
drug prices have increased at four times the inflation rate.7 As this case illustrates,
pharmaceutical companies’ efforts to extend and protect their patent monopolies
contribute to this dire problem. Older Americans simply cannot afford the inequity
of drug companies being permitted to retain hundreds of millions of dollars in ill-
gotten gains earned in proven anticompetitive schemes. FTC Section 13(b) redress
actions directly address this inequity.
Second, an opinion holding that the FTC lacks the authority to seek
monetary equitable relief under Section 13(b) would strip the FTC of one of its
most important protections against fraudulent and deceptive sales practices. As
with high drug prices, older Americans suffer disproportionately from fraud and
deception. A 2013 FINRA report concluded that, at least for fraud involving
financial products, Americans over 65 are more likely to be targeted by fraudsters
and more likely to lose money.8 Older Americans confront innumerable
6 AARP, Why Drugs Cost So Much, AARP Bulletin, May 2017, at 2,
https://www.aarp.org/content/dam/aarp/health/healthy-living/2017/04/drug-prices-
download-final.pdf. 7 Stephen W. Schondelmeyer & Leigh Purvis, Trends in Retail Prices of Brand
Name Prescription Drugs Widely Used by Older Americans: 2017 Year-End
Update 3 (Sept. 2018), https://www.aarp.org/content/dam/aarp/ppi/2018/09/trends-
in-retail-prices-of-brand-name-prescription-drugs-year-end-update.pdf. 8 Applied Research & Consulting LLC, Financial Fraud and Fraud Susceptibility
in the United States 18 (Sept. 2013),
https://www.saveandinvest.org/sites/default/files/Financial-Fraud-And-Fraud-
Susceptibility-In-The-United-States.pdf.
5
advertising pitches deceptively claiming that products and services can reverse
aging, prevent age-related diseases, and provide retirement security. The FTC’s
ability to seek redress under Section 13(b) is an indispensable tool in this never-
ending battle.
Finally, other monetary-relief provisions in the FTC Act are no substitute.
Section 19 of the FTC Act,9 which provides monetary relief for violations of
administrative orders and certain trade rules, has no application in the antitrust
context. The provision also allows a “free bite at the apple” with respect to order
violations, and offers no monetary remedy where deceptive conduct, reachable by
Section 13(b), falls outside those rules that are subject to Section 19 enforcement.
This Court instead should affirm that – consistent with every other circuit
court that has considered the issue – Section 13(b) of the FTC Act authorizes
equitable monetary relief. See FTC v. Magazine Sols., LLC, 432 F. App’x 155,
158 n.2 (3d Cir. 2011) (recognizing in a non-precedential decision that an
argument that the FTC lacks disgorgement authority under § 13(b) is simply
“incorrect,” and “[o]ur sister Courts of Appeals recognize that district courts have
discretion to grant monetary equitable relief under section 13(b)”).
9 15 U.S.C. §57b (2016).
6
ARGUMENT
I. FTC’s Section 13(b) Redress Authority Is Indispensable In The Fight
Against Inflated Prescription Drug Prices And Consumer Fraud, Both
Of Which Disproportionately Impact Older Americans.
Amici strongly support the FTC’s decision to exercise its consumer redress
authority in this case, seeking to return over a billion dollars to purchasers of
AntroGel, a product used by many older adult males. The district court ruled that
Defendants-Appellees confiscated hundreds of millions of dollars that rightfully
should have remained in consumers’ pockets, had legitimate competition between
branded and generic drug products been allowed to run its course. FTC v. AbbVie
Inc., 329 F. Supp. 3d 98, 134-36 (E.D. Pa. 2018). Below, Amici address the
critical need for this Section 13(b) redress authority in all such cases, plus in the
agency’s consumer protection efforts on behalf of older Americans.
A. Older Adults Are Particularly Vulnerable To Harms Caused By
Anticompetitive Prescription Drug Price-Inflation Schemes.
A ruling that the FTC lacks the authority to pursue monetary redress in cases
involving anticompetitive drug-pricing schemes would deal a severe blow to all
consumers, but especially to older adults. The price of prescription drugs is
causing a true crisis in this country for older Americans. Overall, drug prices have
risen at well above the rate of inflation for over a decade – with double-digit
7
annual increases in one five-year stretch – and in some years the rate has been as
high as four times the inflation rate.10
Older adults are hardest hit by this prescription drug crisis.11 In
Congressional testimony delivered in May, AARP’s Leigh Purvis testified that, in
a recent survey of voters over 50, “80% say they take at least one prescription
medication and 72% say they’re concerned about the cost of their medications.
Moreover, 60% say prescription drug costs are unreasonable and many indicate
they have or will need to make trade-offs in order to afford their medications.”12
Indeed, the average Medicare household can expect to spend nearly 15 percent of
their total spending on healthcare.13 Among the wider public, 62 percent of
Americans report taking at least one prescription medication, and fully 8 in 10 say
that prescription drug prices are unreasonable.14
10 Schondelmeyer & Purvis, supra note 7. 11 See generally Leading the Fight to Stop Rx Greed, AARP (Mar. 25, 2019,
2:24PM), https://blog.aarp.org/aarp-media-relations/leading-the-fight-to-stop-rx-
greed. 12 Lowering Prescription Drug Prices, supra note 4 at 2. 13 Drug Pricing in America: A Prescription for Change, Part I, Hearing Before the
S. Finance Comm., 116th Cong. 3 (Jan. 29, 2019) (written testimony of Mark
Miller, Ph.D. (citing Charles Roehrig, Projections of the Prescription Drug Share
of National Health Expenditures Including Non-Retail (May 2018)). 14 Public Opinion on Prescription Drugs and Their Prices, Kaiser Family Found.
(July 15, 2019), https://www.kff.org/slideshow/public-opinion-on-prescription-
drugs-and-their-prices/.
8
High prescription prices also lead many patients to forego needed
medication. Almost a third of patients have reported that they did not take their
medication as prescribed because of cost.15 The consequences for patients are dire
– poor medication adherence can lead to decreased quality of life and even death.
Studies have estimated that nearly a third to half of all treatment failures are likely
attributable to non-adherence.16 Moreover, between $100 and $300 billion of
avoidable health care costs annually, or 3 to 10 percent of total U.S. health care
costs, may be attributable to medication non-adherence.17
AARP has sounded the alarm that drug companies’ anticompetitive practices
are partly to blame, noting that “pharmaceutical companies have become adept at
coming up with strategies to extend their monopoly on a drug beyond the
expiration of its original patent.”18 Whether they extend a monopoly’s period
15 Id. (reporting that 29 percent of respondents cut pills in half, skipped doses,
substituted medications, or decided not to fill a prescription altogether). 16 Thomas H. Wroth & Donald E. Pathman, Primary Medication Adherence in a
Rural Population: The Role of the Patient-Physician Relationship and Satisfaction
of Care, 19 J. Am. Board Fam. Med. 478, 478 (2006). 17 Aurel O. Iuga & Maura J. McGuire, Adherence and Health Care Costs, 7 Risk
Mgmt. & Healthcare Pol’y 35, 37 (2014). See also Amer. Coll. Prev. Med.
Medication Adherence – Improving Health Outcomes 6 (2011),
http://c.ymcdn.com/sites/www.acpm.org/resource/resmgr/timetools-
files/adherenceclinicalreference.pdf (reporting that non-adherence is estimated to
cause 125,000 deaths annually). 18 AARP, supra note 6. Indeed, that article listed the operating profit margins of
prominent drug manufacturers – defendant AbbVie was second on that list. Id. Its
36.6% margin for 2016 was more than triple the average for all S&P 500
companies that year and well ahead of companies such as Alphabet, Verizon, and
9
beyond the expiration date, artificially seek to expand the patent’s scope to
products that should not be covered, pay off potential market entrants, or engage in
sham litigation, the result is the same – fewer choices, less competition, and higher
prices for consumers.
Allowing pharmaceutical companies to retain the massive ill-gotten gains
from such schemes is plainly inequitable. When generic manufacturers compete
on a level playing field, consumers see dramatic savings. A recent report by the
White House’s Council of Economic Advisors estimated $26 billion in total
savings from generic drugs that entered the market from January 2017 through
June 2018.19 The Association for Accessible Medicines, a trade group for generic
manufacturers, concluded that generics, both new entrants and existing drugs,
generated $293 billion in savings in 2018.20 “Pay-for-delay” deals and similar
conduct forestall or eliminate these benefits. See generally FTC v. Actavis, 133 S.
Coca-Cola. Id. 19 Council of Economic Advisors, The Administration’s FDA Reforms and
Reduced Biopharmaceutical Drug Prices 10 (Oct. 2018),
https://www.whitehouse.gov/wp-content/uploads/2018/10/The-Administrations-
FDA-Reforms-and-Reduced-Biopharmaceutical-Drug-Prices.pdf. See also Generic
Competition and Drug Prices, Food & Drug Admin., https://www.fda.gov/about-
fda/center-drug-evaluation-and-research/generic-competition-and-drug-prices (last
updated Nov. 20, 2017) (“Generic competition is associated with lower drug
prices, with the entry of the second generic competitor being associated with the
largest price reduction.”). 20 2019 Generic Drug and Biosimilars Access and Savings in the U.S., Ass’n for
Accessible Meds., https://accessiblemeds.org/resources/blog/2019-generic-drug-
and-biosimilars-access-savings-us-report (last visited July 23, 2019).
10
Ct. 2223, 2229 (2013). Such settlements cost consumers approximately $3.5
billion per year, as the FTC found in a 2010 report.21
Requiring companies responsible for such anticompetitive schemes to
disgorge ill-gotten gains is a matter of simple equity. Telling those companies,
“sin no more, but keep your windfall,” is not.
B. The FTC’s Section 13(b) Redress Authority Has Been
Indispensable In The Fight Against Consumer Fraud And
Deception Impacting Older Americans.
Defendants-Appellees’ strained interpretation of the FTC Act poses an
equally consequential threat – stripping the FTC of one of its most important
remedial weapons in the fight against consumer fraud and deception victimizing
older Americans.
For over three decades, the FTC has used its Section 13(b) authority to seek
monetary redress for victims of deceptive practices.22 The agency in the early
21 Fed. Trade Comm’n, Pay for Delay: How Drug Company Pay-Offs Cost
Consumers Billions 2 (Jan. 2010),
https://www.ftc.gov/sites/default/files/documents/reports/pay-delay-how-drug-
company-pay-offs-cost-consumers-billions-federal-trade-commission-staff-
study/100112payfordelayrpt.pdf. 22 The typical FTC Section 13(b) consumer protection order provides that
disgorgement is to be given to consumers when feasible. See, e.g., Stipulated
Order for Permanent Injunction and Other Equitable Relief, FTC v. Lumos Labs,
Inc., Case No. 3:16-cv-00001-sk, at *11 (N.D. Cal. Jan. 8, 2016),
https://www.ftc.gov/system/files/documents/cases/160105lumoslabsstip.pdf. The
FTC reports annually on its efforts to return the funds to victims. See, e.g., 2018
FTC Annual Report on Refunds to Consumers,
https://www.ftc.gov/system/files/documents/reports/2018-annual-report-refunds-
11
1980’s expanded the Section 13(b) redress program,23 with the courts consistently
holding that the FTC Act provides for this relief.24 Today, the FTC has continued
pursuing Section 13(b) redress in cases involving financial fraud, deceptive
practices by mainstream companies,25 and cases involving health claims that lack
sufficient scientific basis.26
A recent example on the financial front is FTC v. NetSpend, No. 1:16-CV-
4203 (N.D. Ga. Apr. 10, 2017), where the seller, focusing on low-income and
consumers/annual_redress_report_2018.pdf. 23 See, e.g., FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431 (11th Cir. 1984)
(deceptive sale of investments); FTC v. World Travel Vacation Brokers, Inc., 861
F.2d 1020 (7th Cir. 1988) (deceptive sale of vacation packages); FTC v. Sec. Rare
Coin & Bullion Corp., 931 F.2d 1312 (8th Cir. 1991) (deceptive sale of rare coins
as investments). 24 See, e.g., FTC v. Febre, 128 F.3d 530, 537 (7th Cir. 1997) (affirming award of
$16,096,345 measured by consumer loss); FTC v. Ross, 743 F.3d 886, 890-92 (4th
Cir. 2014); FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 15 (1st Cir. 2010). 25 See, e.g., FTC v. AT&T Mobility, LLC, No. 1:14-cv-3227-HLM (N.D. Ga. Oct.
8, 2014) (providing for $88 million in refunds to consumers for “cramming”
unauthorized third-party charges on telephone bills), https://www.ftc.gov/news-
events/press-releases/2016/12/ftc-providing-over-88-million-refunds-att-
customers-who-were; FTC v. Volkswagen Group of Am., Inc., No. 3:15-md-02672
(N.D. Cal. June 27, 2016) ($10 billion fund set up for purchasers of autos subject
to allegedly misleading “Clean Diesel” claims),
https://www.ftc.gov/system/files/documents/cases/2843_-_ftc_3.0l_order.pdf . 26 See Protecting Consumers from False and Deceptive Advertising of Weight-Loss
Products: Hearing Before Subcomm. on Consumer Prot., Prod. Safety, & Ins. Of
the S. Comm. on Commerce, Science, and Transp., 113th Cong. 3 (2014)
(statement of Mary Koelbel Engle, Assoc. Dir., Division of Advertising Practices,
Fed. Trade Comm’n),
https://www.ftc.gov/system/files/documents/public_statements/316321/140617fals
edecepweightloss.pdf.
12
“unbanked” consumers, allegedly deceived them regarding their ability to access
reloadable prepaid debit cards. In September 2018, the FTC mailed more than
430,000 checks to return more than $10 million to victims of this scheme.27 A
further example on the healthcare front is the case FTC v. Sensa Products, 2014
U.S. LEXIS 183291 (N.D. Ill. 2014), where the agency mailed 477,083 refund
checks totaling over $26 million to consumers who bought a product alleged to
have made unsubstantiated weight-loss supplement claims.28
Older Americans inevitably are injured in large numbers by such mass
marketing schemes. However, the FTC also seeks redress in cases where the
sellers specifically target AARP’s constituency. In March 2019, for example, the
agency announced that it had obtained over $21 million for victims in the case
FTC v. Next-Gen, Inc., No. 4:18-CV-0128-DGK (W.D. Mo. Mar. 7, 2019). This
was a sweepstakes scam that specifically targeted older adults.29 The complaint
alleged that the operators sent personalized mailers falsely representing that the
27 See Press Release, FTC Returns More than $10 Million to NetSpend Customers
(Sept. 17, 2018), https://www.ftc.gov/news-events/press-releases/2018/09/ftc-
returns-more-10-million-netspend-customers. 28 See Press Release, FTC Sends Refund Checks Totaling More Than $26 Million
to Consumers Who Bought Sensa Weight-Loss Supplement (Dec. 10, 2014),
https://www.ftc.gov/news-events/press-releases/2014/12/ftc-sends-refund-checks-
totaling-more-26-million-consumers-who. 29 See Press Release, Operators of Sweepstakes Scam Forfeit $30 Million to Settle
FTC Charges (Mar. 7, 2019), https://www.ftc.gov/news-events/press-
releases/2019/03/operators-sweepstakes-scam-will-forfeit-30-million-settle-ftc.
13
recipient was likely to win a substantial cash prize of as much as $2 million, if they
paid fees up to $139.99.30 Under the settlement, the defendants will pay $21
million in cash as redress, supplemented by proceeds from the receiver’s
liquidation of the operators’ property.31
In FTC v. Lumos Labs, Inc., No. 3:16-cv-00001-sk, at *11 (N.D. Ca. Jan. 8,
2016), the FTC alleged that the company deceived consumers with unfounded
claims that the Lumosity “brain training” games could reduce or delay cognitive
impairment associated with age.32 There, the FTC obtained $2 million in consumer
redress as part of its settlement with the creators and marketers of Lumosity.33
The FTC’s Protecting Older Consumers Report to Congress demonstrates
that the FTC, without pause, has continued filing numerous Section 13(b) redress
actions protecting older Americans.34 Now is not the time for the FTC to lose one
of its most historically effective remedies. Despite persistent efforts by the FTC
30 Id. 31 Id. 32 See Press Release, Lumosity to Pay $2 Million to Settle FTC Deceptive
Advertising Charges for Its “Brain Training” Program (Jan. 5, 2016),
https://www.ftc.gov/news-events/press-releases/2016/01/lumosity-pay-2-million-
settle-ftc-deceptive-advertising-charges. 33 Id. 34 See Fed. Trade Comm’n, Protecting Older Consumers (2017-2018): A Report of
the Federal Trade Commission 1, App. A,
https://www.ftc.gov/system/files/documents/reports/protecting-older-consumers-
2017-2018-report-congress-federal-trade-
commission/protecting_older_consumers_-_ftc_report_10-18-18.pdf.
14
and others, consumer fraud and deception remains a costly and widespread
problem. The FTC has reported that consumer fraud losses in 2018 had increased
almost 40 percent from the year before.35 And older Americans continue to suffer
in large numbers. The Senate Special Committee on Aging reports in its “Fraud
Book” that older Americans alone lose $2.9 billion annually.36 A vast array of
companies continue to sell worthless investments, overpriced or useless goods, and
unhealthful products with advertising claims that prey on older Americans’ fears
and other emotions.37 The FTC’s Section 13(b) redress authority is an
indispensable tool in this fight.
II. The Alternative Monetary Relief Provisions In The FTC Act Are No
Substitute For Section 13(b) Redress Authority In The Fight Against
High Prescription Drug Prices And Consumer Deception.
This Court should be under no illusion – the FTC’s authority to seek
equitable monetary relief under Section 13(b) is critical to the agency’s ability to
tackle the foregoing challenges. Other FTC Act provisions are no substitute.
First, Section 19 of the FTC Act, which allows monetary relief for violations
of certain administrative orders and trade regulation rules, does not apply to
35 Fed. Trade Comm’n, Consumer Sentinel Network: Data Book 2018 4 (Feb.
2019), https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-
network-data-book-2018/consumer_sentinel_network_data_book_2018_0.pdf. 36 Senate Spec. Comm. on Aging, Fighting Fraud: Senate Aging Committee
Identifies Top 10 Scams Targeting Our Nation’s Seniors 3,
https://www.aging.senate.gov/fraudbook/index.html. 37 Id.
15
antitrust violations.38 Thus, Section 13(b) stands as the agency’s sole avenue for
obtaining equitable redress for victims of multi-million-dollar antitrust schemes.
Second, Section 19 also has limitations on the consumer protection side. To
begin with, waiting to sue for violations of existing administrative orders is simply
no way to combat fast-moving deceptive practices. As the Second Circuit aptly
observed in FTC v. Bronson Partners, LLC, requiring the FTC to seek monetary
relief only from those defendants who are already under an order “entered in the
wake of a lengthy administrative process” creates “substantial opportunities for
delay” and allows deceptive actors “at least once [sic] free shot at violating the
Act.” 654 F.3d 359, 366 n.3 (2d Cir. 2011). By the same token, Section 19 offers
no monetary redress for deceptive conduct that is reachable in flexible Section
13(b) actions, but falls outside the scope of those rules that are subject to Section
19 enforcement.39
38 Section 19 of the FTC Act provides for consumer redress and other equitable
relief only with respect to violations of certain orders and regulations that involve
“unfair or deceptive acts or practices,” not the “unfair methods of competition”
applicable in this case. 15 U.S.C. §§ 57b(a), (b) (2016). 39 For example, the FTC’s Telemarketing Sales Rule (16 C.F.R. § 310 (2010)),
though a valuable weapon, does not cover internet, direct mail, TV, radio, or print
campaigns not involving telephone calls in the marketing or sales transaction. See,
e.g., FTC v. Lumos Labs, Inc., No. 3:16-cv-00001-sk (N.D. Ca. Jan. 8, 2016)
(internet and app store sales); FTC v. Next-Gen, Inc., No. 4:18-CV-0128-DGK
(W.D. Mo. Mar. 7, 2019) (mailed prize promotions).
16
In sum, the district court was correct in concluding that accepting
defendants’ interpretation “would eviscerate the FTC Act.” FTC v. AbbVie Inc.,
329 F. Supp. 3d 98, 137 (E.D. Pa. 2018). As the court noted in the context of this
case, “[i]f the defendants’ position about Section 13(b) is correct, the monopolist
will be able to retain its ill-gotten gains and simply face an injunction against
future wrongdoing but even then only if the wrongdoing is continuing or is likely
to continue.” Id.
CONCLUSION
After scrutinizing an extensive record and weighing the equities, the district
court found that Defendants’ conduct justified equitable monetary relief under
Section 13(b) of the FTC Act. For the reasons above, this court should affirm this
considered judgment.
Dated: July 26, 2019 Respectfully submitted,
/s/William Alvarado Rivera
William Alvarado Rivera
Counsel of Record
Maame Gyamfi
AARP Foundation
601 E Street, NW
Washington, DC 20049
(202) 434-3392
17
CERTIFICATE OF SERVICE
I hereby certify that on July 26, 2019, I electronically filed the foregoing with
the Clerk of the Court for the United States Court of Appeals for the Third Circuit
using the appellate CM/ECF system.
I certify that all participants in the case are registered CM/ECF users and that
I will serve the brief using the appellate CM/ECF system.
Dated: July 26, 2019 /s/ William Alvarado Rivera
Attorney for Amici Curiae
18
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Dated: July 26, 2019 /s/ William Alvarado Rivera
Attorney for Amici Curiae