Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Monopoly power to be decided at trial of reverse payment suit, (Aug 20, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by direct purchasers against the brand and generic pharmaceutical manufacturers over the alleged delayed generic competition of a sleeping disorder medication, issues of material fact precluded the grant of summary judgment on whether the brand drug manufacturer had monopoly power in the relevant market, the federal district court in Philadelphia has ruled (Apotex, Inc. v. Cephalon, Inc., August 19, 2014, Goldberg, M.).

Generic drug manufacturers, pharmaceutical distributors, retailers, and health plan providers that purchased a sleeping disorder medication (modafinil) sold under the brand name Provigil, filed a series of class action suits against pharmaceutical manufacturer, Cephalon, Inc., and four generic drug manufacturers for anticompetitive conduct and monopolization by delaying generic competition to Provigil in violation Sections 1 and 2 of the Sherman Act. The plaintiffs alleged that the manufacturers engaged in restraint of trade by entering into reverse payment settlements to resolve patent infringement suits, thereby delaying generic competition for Provigil. In a consolidated action, the patent infringement and antitrust claims were bifurcated and, at a bench trial on the patent claims, the court ruled that Cephalon’s procurement of its RE ‘516 patent was through inequitable conduct and, therefore, invalid. In March 2014, Apotex’s motion for summary judgment on the issue of antitrust liability was granted with respect to materiality. However, the issue of Cephalon’s monopoly power in the modafinil market was deferred.

The court found that Apotex failed to conclusively establish the relevant product market. Monopoly power is the power to control prices or exclude competition in the relevant market. Apotex contended that Cephalon’s patent activity, which created a barrier to entry into the modafinil market; history of significant price increases for without lost sales; large gross margins on sales of Provigil; and statements from Cephalon executives that Provigil faced no competition constituted direct evidence of monopoly power. Cephalon responded that Provigil’s high and increasing prices were not compared to its costs, brand drugs have higher associated costs than generics, and Provigil faced numerous competition of its on and off label uses.

Moreover, Apotex and Cephalon presented conflicting expert testimony regarding the existence and economic significance of data relevant to market definition, modafinil characteristics and uses, and existence of competition. Since there were many factual disputes regarding the issue of monopoly power, a trial was deemed necessary to sort through the competing versions of the facts, the court concluded.

The case is No. 2:06-cv-2768.

Attorneys: Brian J. Sodikoff (Katten Muchin Rosenmann LLP), Edward A. Diver (Langer Grogan & Diver PC), and Julie A. Katz (Welsh & Katz Ltd.) for Apotex, Inc. Amy K. Wigmore (Wilmer Hale) for Cephalon, Inc. Edwin John U. (Kirkland & Ellis LLP) for Barr Laboratories, Inc. C. Fairley Spillman (Akin Gump Strauss Hauer & Feld LLP) for Mylan Laboratories, Inc. Charles J. Bloom (Stevens & Lee PC) for Teva Pharmaceutical Industries, Ltd. Danielle R. Foley (Venable LLP) for Ranbaxy Laboratories, Ltd.

Companies: Apotex, Inc.; Cephalon, Inc.; Barr Laboratories, Inc.; Mylan Laboratories, Inc.; Teva Pharmaceutical Industries, Ltd.; Ranbaxy Laboratories, Ltd.

Cases: Antitrust PennsylvaniaNews