Antitrust Law Daily Wrap Up, ANTITRUST—D. Mass.: Monopoly claims based on fraud on FDA adequately alleged, (Sep 9, 2016)

By Jeffrey May, J.D.

A putative class action can proceed against generic drug maker Ranbaxy for allegedly filing Abbreviated New Drug Applications (ANDAs) with the Food and Drug Administration (FDA) containing false statements in an effort to lock in the exclusivity periods and deter other potential generic drug manufacturers from entering the market for generic Diovan and Valcyte. The federal district court in Boston has accepted a magistrate judge’s recommendation that Ranbaxy’s motion to dismiss claims under the Sherman Act, Section 2 and the Racketeer Influenced and Corrupt Organizations (RICO) Act be denied (Meijer, Inc. v. Ranbaxy, Inc., September 7, 2016, Gorton, N.).

The suit alleges that Ranbaxy engaged in fraud on the FDA in a scheme to keep generic competitors out of the market for Valsartan (branded Diovan), which is used to treat hypertension and heart failure, and for valganciclovir hydrochloride (Valcyte), which is an antiviral medication, approved by the FDA for the treatment of cytomegalovirus retinitis in AIDS patients and for the prevention of the disease in organ transplant recipients. The plaintiffs alleged that as a result of the conduct, they and class members paid higher prices for these drugs because they were unable to purchase lower-priced generic equivalents.

Impact of Food, Drug and Cosmetic Act. The claims were not precluded by the Food, Drug and Cosmetic Act (FDCA), the court ruled at the outset. The FDCA’s narrow medical device preemption clause could not be used to bar the Sherman Act and RICO claims with regard to drugs. Moreover, while the FDA had exclusive authority to punish and deter fraud upon itself, this did not extend to anticompetitive behavior. Thus, the agency’s powers were not infringed upon by the suit. The government’s investigation and punishment of Ranbaxy for its conduct did not address anticompetitive injury of the type that the plaintiffs allegedly suffered, and the plaintiffs alleged Ranbaxy’s fraud in vivid detail, the court noted. Even though the FDA did not make a fraud determination with respect to Ranbaxy’s generic Diovan ANDA, the plaintiffs may be able to prove fraud to support their claims, in the court’s view.

Noerr-Pennington doctrine. The Noerr-Pennington doctrine did not bar the claims because the plaintiffs adequately alleged that the sham exception to the doctrine applied. The plaintiffs alleged facts to show sham petitioning through the defendant’s submission of large volumes of ANDAs in hopes of blocking their competitors.

Monopolization. The court was satisfied that the plaintiffs alleged the elements of a Sherman Act, Section 2 claim. They pleaded monopoly power by alleging actual detrimental effects on the market and financial harm to consumers. As for anticompetitive conduct, the plaintiffs adequately alleged that Ranbaxy acquired and maintained power, in the form of the right to the exclusionary period under the ANDAs, through a scheme of deception and delay rather than lawful competitive means. The court also concluded that the plaintiffs adequately alleged proximate cause to survive a motion to dismiss.

RICO. The plaintiffs alleged facts to support the elements of RICO, the court ruled. They contended that Ranbaxy enlisted the help of a law firm and a regulatory consultant to prolong the deceit of the FDA, in violation of RICO. The court was satisfied that the complaint sufficiently alleged that Ranbaxy, its law firm, and the consultant formed a RICO enterprise and engaged in a pattern of racketeering activity. A RICO conspiracy also was alleged based on purported agreements for the purpose of hiding Ranbaxy’s compliance issues from the FDA.

This is Case No. 1:15-cv-11828-NMG.

Attorneys: John D. Radice (Radice Law Firm, PC) and Steve D. Shadowen (Hilliard & Shadowen LLP) for Meijer, Inc. Danielle R. Sassoon (Kirkland & Ellis LLP) and Laurence A. Schoen (Mintz, Levin, Cohn, Ferris, Glovsky & Popeo) for Ranbaxy Inc. and Sun Pharmaceuticals Industries Ltd.

Companies: Meijer, Inc.; Ranbaxy Inc.; Sun Pharmaceuticals Industries Ltd.

Cases: Antitrust RICO MassachusettsNews