Southern District Of New York Dismisses “Truly Novel” Restraint Of Trade Theory In Pharmaceutical Antitrust Action
10/17/2019On October 8, 2019, United States District Judge for the Southern District of New York Ronnie Abrams dismissed all but one claim in a putative antitrust class action brought against Takeda Pharmaceutical Company Ltd. and various Takeda entities, as well as generic manufacturers Teva Pharmaceuticals, Ranbaxy Pharmaceutical Industries Ltd., Actavis PLC, and Mylan Inc. In re: Actos Direct Purchaser Antitrust Litigation, No. 1:15-cv-03278 (S.D.N.Y. Oct. 8, 2019). The class complaint alleged that Takeda illegally conspired with the other defendants to delay generic competition for its blockbuster diabetes drug Actos through a series of patent settlement agreements, which granted the other defendants non-exclusive licenses to produce generic Actos at a future date prior to the expiration of Takeda’s patents. The Court dismissed these conspiracy claims, finding that plaintiffs’ “truly novel” theory for why the settlement agreements between Takeda and the other defendants violated the antitrust laws lacked “even a colorable basis” of support. The Court’s decision left in place one remaining claim against Takeda for monopolization.
Beginning in the 1980s, Takeda obtained a series of patents related to its brand-name diabetes drug, Actos. In its submissions to the FDA to obtain regulatory approval for Actos, Takeda made certain claims about the scope of its patents that were later published in the FDA’s Orange Book, and which plaintiffs allege were fraudulent misrepresentations. In 2003, Takeda filed patent infringement suits against each of the generic drug makers who sought approval to market generic Actos. In 2010, Takeda reached settlements with each of the generic applicants, under which Takeda granted each a license to produce a generic Actos prior to expiration of the patents.
Plaintiffs alleged that the 2010 settlements constituted a conspiracy between Actos and the generic drug makers to restrain trade and perpetuate Takeda’s monopoly over Actos in violation of Sections 1 and 2 of the Shearman Act. Plaintiffs alleged that most of the settlements were announced within days of each other, that (with the exception of the settlement with Teva) the entry dates for the Actos products were the same, and that the settlement agreements permitted Takeda to share their terms with the other settling generic drug makers.
In granting defendants’ motion to dismiss plaintiffs’ conspiracy claims, the Court contrasted the allegations here with the reverse payment theory allowed by the U.S. Supreme Court in FTC v. Actavis, Inc., 570 U.S. 136 (2013). In Actavis, several generic makers (the defendants) agreed to delay brining their generics to market in return for settlement payments from the patent holder (the plaintiff). The Supreme Court held that a settlement through this type of “reverse payment,” at least where large and unjustified, is subject to antitrust scrutiny under the rule of reason. At the same time, the Supreme Court clarified that patent suits may be settled by other lawful means, including through settlements that allow “the generic manufacturer to enter the patentee’s market prior to the patent’s expiration, without the patentee paying the challenger to stay out prior to that point.” Id. at 158.
The Court here observed that the settlements here did not contain reverse payments as defined in Actavis. Plaintiffs argued that the settlements illegally restrained trade, even in the absence of reverse payments, because defendants conspired to choose a date for generic entry that prolonged Takeda’s exclusivity period, as plaintiffs’ allege, due to Takeda’s misrepresentations to FDA about the scope of the patents. The Court held this “non-reverse payment theory” failed as a matter of law and fact. As to the law, the Court deemed plaintiffs’ theory “novel” and expressed concern that allowing antitrust scrutiny of these settlements would undermine “the salutary public policy favoring settlements.” As a matter of fact, the Court held that plaintiffs failed to show that the generic defendants knew that Takeda’s patent descriptions were false when they reached settlements with Takeda. The Court further held that plaintiffs failed to demonstrate that the Takeda-Teva settlement caused an antitrust injury because Teva was not a first-filer for Actos, was never entitled to an initial exclusivity period, and thus could not have agreed in any event to enter the market with its own product until six months after the first-filers did.
While the Court largely granted defendants’ motion to dismiss, the Court denied the motion as to plaintiffs’ monopolization claim against Takeda, ruling that plaintiffs adequately pled that Takeda’s statements to the FDA misrepresented the scope of certain of its patents covering Actos, resulting in antitrust injury by delaying generic entry. The Court thus permitted plaintiffs to proceed with Count I of their complaint for monopolization against Takeda, but dismissed all other counts.
The Court’s ruling serves as further guidance on the limits of the Supreme Court’s holding in Actavis, which extended antitrust scrutiny to certain reverse-payment patent settlements. The ruling demonstrates that courts remain concerned about discouraging settlements by allowing antitrust suits to second-guess those settlements.