Health Law Daily Wrap Up, ANTITRUST—D. Mass.: Monopolization claims based on product hopping adequately alleged, (Jul 22, 2016)

By Jeffrey May, J.D.

Claims that Warner Chilcott engaged in "product hopping" by withdrawing its branded ulcerative colitis drug Asacol from the market as its patents were expiring and introducing reformulated versions of the drug to impede generics can proceed, the federal district court in Boston has decided. A separate conspiracy claim against Warner Chilcott and generic drug company Zydus Pharmaceuticals USA Inc. based on a patent litigation settlement agreement that purportedly prevented Zydus from introducing generic Asacol HD, a reformulated delayed-release version of the drug, was dismissed on standing grounds (In re Asacol Antitrust Litigation, July 20, 2016, Casper, D.).

Standing. At the outset, the court ruled that the plaintiffs, health fund plaintiffs and a consumer, who purchased the drugs, adequately pleaded that they had standing to pursue the product hopping claim. Warner Chilcott contended that the plaintiffs lacked standing because they did not sufficiently allege that the conduct prevented or delayed generic entry of Asacol. However, the court could not conclude as a matter of law at this stage of the litigation that Warner Chilcott’s actions in no way caused the plaintiffs’ alleged injuries—paying inflated prices for the reformulated drugs. The court noted that discontinuing Asacol and switching users to reformulated drugs that were patent-protected—Asacol HD and delayed-release Delzicol—would weaken a generic drug company’s ability to convert the branded drugs’ users to generics.

However, the plaintiffs lacked standing to challenge the settlement agreement between Warner Chilcott and Zydus. The defendants successfully argued that Zydus’s failure to introduce generic Asacol HD was not due to the settlement agreement, but to the Food and Drug Administration (FDA) and there were no plausible allegations that the defendants deliberately slowed the FDA approval process.

Sufficiency of allegations. The monopolization claim under Section 2 of the Sherman Act was adequately alleged, the court ruled. The plaintiffs contended that Warner Chilcott’s purported safety concerns for switching patients to the reformulated drugs were pretextual and did not constitute legitimate business justifications for Asacol’s removal from the market. Further, Warner Chilcott could not rely on its rights under the patent laws to win dismissal of the monopolization claim. The court recognized the tension between the antitrust and patent laws. However, it was noted that the plaintiffs plausibly alleged that Warner Chilcott essentially tried to use patent rights on Delzicol to extend the patent exclusivity period for their ulcerative colitis drugs.

The court rejected the assertion that the Noerr-Pennington doctrine and the Federal Food, Drug and Cosmetic Act (FDCA) required dismissal. Warner Chilcott allegedly submitted multiple FDA citizen petitions to make it harder for other companies to sell generic Asacol. However, the plaintiffs asserted that the citizen petitions "do not form an independent basis" for antitrust liability, but instead "provide context and reveal Defendants’ intent." Thus, the Noerr doctrine’s shield for government petitioning activity was not relevant.

Also rejected was the assertion that the FDCA implicitly precluded antitrust liability. The court could not conclude at this stage of the litigation that a "clear repugnancy" existed between the plaintiffs’ complaint and the FDCA as a matter of law.

State law claims. The Illinois Brick indirect purchaser doctrine did not bar claims under the Montana Unfair Trade Practices Act, as Warner Chilcott contended. Nor did it prevent consumers (as opposed to health fund plaintiffs) from pursuing monopolization claims under the Missouri Merchandising Practices Act. Claims by the health fund plaintiffs under the Massachusetts consumer protection law were dismissed. The claims had to be limited to transactions made "for purely personal reasons." Claims under the Hawaii Antitrust Act and Vermont Consumer Protection Act also were limited to consumers. Thus, the court dismissed the Hawaii and Vermont claims brought by the health fund plaintiffs.

The court refused to dismiss the California state law claims on the ground that the plaintiffs failed to plead consumer-directed deception or reliance under the California Unfair Competition Law.

Warner Chilcott’s suggestion that claims under the laws of 11 states and the District of Columbia should be dismissed on the ground that the challenged actions affected interstate commerce, as opposed to purely or primarily intrastate conduct, as required under the statutes, was rejected. At this stage of the litigation, the court was satisfied that the plaintiffs alleged interstate and intrastate effects.

The case is No. 15-cv-12730-DJC.

Attorneys: Nathaniel L. Orenstein (Berman DeValerio Pease Tabacco Burt & Pucillo) for AFSCME Health and Welfare Fund. Glen DeValerio (Berman DeValerio Pease Tabacco Burt & Pucillo) for Mark Adorney. Alison Hanstead (White & Case LLP) for Allergan, plc and Warner Chilcott Ltd. Andy J. Miller (Locke Lord LLP) for Zydus Pharmaceuticals USA Inc.

Companies: AFSCME Health and Welfare Fund; Allergan, plc; Warner Chilcott Ltd.; Zydus Pharmaceuticals USA Inc.

Cases: CaseDecisions AntitrustNews MassachusettsNews