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

CERTIFICATE OF COMPLIANCE WITH RULE 32(a) AND L.A.R. 31.1(c)

Certificate of Compliance with Type-Volume Limitation, Typeface Requirements,

and Type Style Requirements:

1. This brief complies with the type-volume limitation of Fed. R. App. P.

32(a)(7)(B) because:

This brief contains 2,515 words, excluding the parts of the brief

exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

2. This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6)

because:

This brief has been prepared in a proportionally spaced typeface using

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Certificate of Compliance with Electronic Filing Requirements:

1. This brief complies with the electronic filing requirements of L.A.R.

31.1(c) because:

a. The text of this electronic brief is identical to the text in the paper

copies filed with the Court.

b. The Symantec virus protection program was run on the file

containing this electronic brief, and no virus was detected.

Dated: July 26, 2019 /s/ William Alvarado Rivera

Attorney for Amici Curiae