Generic Drug Manufacturer Barred From Bringing “Sham” Litigation Claim By Previous Settlement
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  • Generic Drug Manufacturer Barred From Bringing “Sham” Litigation Claim By Previous Settlement

    On July 21, 2022, the United States Court of Appeals for the Third Circuit unanimously affirmed a district court judge’s conclusion that a prior settlement released a claim by plaintiff, a generic pharmaceutical manufacturer (the “Company”), that defendants engaged in “sham” patent litigation to block it from launching a generic version of defendants’ brand-name drug.  Perrigo Co, et al. v. AbbVie Inc, et al., No. 21-3026 (3d Cir. Jul. 21, 2022).

    At the time of the litigation in question, defendants were co-owners of a patent covering a pharmaceutical composition used to treat hypogonadism, or low testosterone, which they market as a brand-name topical gel called AndroGel.  In 2011, plaintiff developed a generic version of AndroGel.  Pursuant to the Hatch-Waxman Act, 21 U.S.C. § 355(b)(2)(A)(iv), plaintiff sent defendants notice that it was seeking FDA approval, to which defendants responded by suing for patent infringement.  The lawsuit triggered the Hatch Waxman Act’s automatic 30-month stay on the FDA’s ability to approve the proposed new drug.  The parties settled shortly after the suit was filed, agreeing that plaintiff could start selling its product in 2012.  The FDA approved the generic version in 2013 and plaintiff launched its product in 2014.  In 2020, plaintiff filed a Sherman Act claim in New Jersey district court.  Plaintiff alleged that the 2011 lawsuit was a “sham” that “delayed [plaintiff’s] launch of its generic version of AndroGel 1%” and, as a result, defendants “were able to maintain monopoly power “delaying the entry of much less expensive competitive generic products.”

    Defendants moved for judgment on the pleadings, arguing that plaintiff’s claim was barred by the 2012 settlement agreement, which included a mutual release of claims arising out of the litigation.  Plaintiff argued that the settlement agreement only released claims accruing prior to the Effective Date of March 27, 2012, and for that reason its case was not barred because it had not suffered an immediate injury when defendants sued in 2011.  Plaintiff argued that because the FDA had not yet approved its application to sell the generic version of Androgel, its damages were therefore speculative, and its claim did not accrue at the time defendants allegedly filed a “sham” lawsuit.  U.S. District Judge Brian Martinotti sided with defendants, noting that a claim of sham litigation generally arises at the time that the alleged sham litigation is filed, and such a claim would be within the scope of the release.

    On appeal, the Third Circuit agreed and affirmed Judge Martinotti’s decision, reasoning that a cause of action predicated on sham litigation accrues at the time the litigation is filed.  Although a plaintiff’s cause of action does not accrue if damages are speculative, the Third Circuit held that to invoke this principle, plaintiff would need to show “that prior to March 27, 2012, it was uncertain whether they would suffer damages, not simply that it was uncertain how much they would suffer.”  Expanding upon this, the panel said that difficulty ascertaining damages should not be “confused with right of recovery” and noted that plaintiff’s complaint itself showed that damages could reasonably have been estimated before the date of FDA approval because it cited specific sales and market share data before the allegedly sham lawsuit was filed.  The panel also noted that due to the Hatch-Waxman Act’s automatic stay plaintiff “felt the adverse impact of the litigation upon its filing.”

    Because plaintiff’s purportedly sham litigation claims accrued before the settlement, the Third Circuit held that plaintiff had released them.