Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Drug retailer supermarkets sue Takeda over its proprietary drug Dexilant® monopoly, (Mar 26, 2025)

By Kenneth H. Ryesky, M.B.A., J.D.

Takeda allegedly restrained competition by delaying entry of generic equivalents in $9.5 million "pay for delay" patent litigation settlement with a generic drug manufacturer.

Four supermarket chains that also have significant pharmaceutical sales have filed an antitrust complaint in a federal district court in San Jose, California, against a Japan-based proprietary drug manufacturer and a Taiwan-based generic drug manufacturer. The complaint alleges an illegal "pay for delay" agreement, in violation of the Sherman Act, whereby the generic manufacturer has allegedly agreed to delay marketing its generic version of a patented proprietary drug so that the proprietary drug manufacturer can extend its monopoly under the patent. The co-plaintiffs have demanded that the trial, if any, be held before a jury (Walgreen Co. v. Takeda Pharmaceutical Company Limited, No. 5:25-cv-02785-VKD (N.D. Cal. Mar. 25, 2025)).

Japan-based Takeda Pharmaceutical Company Limited and two of its U.S.-based controlled subsidiaries (collectively, Takeda) are proprietary drug manufacturers. Taiwan-based TWi Pharmaceuticals, Inc. and its New Jersey based controlled subsidiary (collectively, TWi) are generic drug manufacturers. Walgreen Co., The Kroger Co., Albertsons Companies, Inc., and H-E-B, L.P. (collectively, the drug retailers) operate retail drug stores throughout the United States and elsewhere.

Takeda held patent rights to the drug dexlansoprazole, which it markets as the proprietary drug Dexilant®. Dexlansoprazole is a prescription drug used to treat esophagitis and gastroesophageal reflux; it is among the top 200 drugs prescribed in the USA, with more than 2 million prescriptions annually. Upon FDA approval of the drug in 2009, Takeda had a legal monopoly on it; Takeda's annual revenues from Dexilant® between 2015 and 2022 exceeded one billion dollars.

TWi and other generic manufacturers had applied for FDA approval to produce and market its own generic version of dexlansoprazole. Per the FDA's regulatory scheme, Takeda had the opportunity to challenge those applications; Takeda did so through the patent litigation option. The trial court judgments resulted in TWi not being able to introduce its generic dexlansoprazole until at least June 15, 2020, and the other generic manufacturers on later dates. Takeda appealed those rulings to the federal Circuit court, but settled the cases with the generic manufacturers before the appellate court could rule on the appeal. The settlement agreement provided (1) TWi would not bring its generic dexlansoprazole product to the market until at least January 2022; (2) Takeda paid $9.5 million to TWi; and (3) TWi was authorized by Takeda to market a generic version of Takeda's Dexilant® product instead of having to await final FDA approval of its proposed generic dexlansoprazole. The authorized generic version (AG version) route was less expensive, less time-consuming, and provided more certainty for TWi than submitting the paperwork and awaiting the outcome of the Abbreviated New Drug Application (ANDA) to produce and market its generic dexlansoprazole. Until November 22, 2022, TWi's AG version was the only generic dexlansoprazole on the market to compete with Takeda's Dexilant®.

The drug retailers filed a complaint against Takeda and TWi, alleging that the settlement agreement is an illegal restraint upon competition that elevates their expenses in purchasing dexlansoprazole to sell to their retail customers.

Allegations-agreement in restraint of trade. The drug retailers' complaint alleges, as against Takeda and TWi, that the settlement agreement restrained competition in violation of the Sherman Act, Section 1 [15 U.S.C. § 1]. The $9.5 million amount of the reverse payment allegedly exceeds by a significant sum TWi's expectable expenses in continuing the litigation and is disproportionately excessive for its purported purpose to settle the pending court case. Alternatively, the drug retailers allege that the so-called "settlement agreement" was TWi was "an illegal temporal horizontal market-allocation agreement, a per se violation of section one of the Sherman Act." Had Takeda and TWi not entered into the agreement, the drug manufacturers allege that their past and ongoing purchases of dexlansoprazole would be for a significantly lesser outlay because of increased competition in the multibillion dollar dexlansoprazole market.

Allegations-monopolization. The drug retailers' complaint alleges, as against Takeda only and not TWi, monopolization in violation of the Sherman Act, Section 2 [15 U.S.C. § 2]. They allege that Takeda purposefully used improper means to maintain its monopoly beyond the relevant patent expirations, thereby causing the drug retailers to pay supracompetitive prices for dexlansoprazole.

When Takeda's Dexilant® was approved by the FDA, it was listed in the FDA publication Approved Drug Products With Therapeutic Equivalence Evaluations (Orange Book). Listings in the Orange Book include patents that possibly pertain to the drug, so that prospective generic equivalent manufacturers can anticipate them in their applications to the FDA. The complaint alleges that "the FDA merely performs a ministerial act" in listing such patents in the Orange Book, lacking the appropriate resources to further verify and relying "completely on the brand manufacturer’s truthfulness in submitting patents to be listed." The complaint alleges that many of the patents listed by Takeda for its Dexilant® entry were of questionable relevance and treated accordingly in Takeda's litigation regarding not only Dexilant®, but two of Takeda's other proprietary drugs, Amitiza® (lubiprostone) and Colcrys® (colchicine). Such arguably extraneous patents, asserts the complaint, are listed by Takeda for the purpose of placing roadblocks to the entry of generic competition to its products, thereby extending Takeda's lucrative monopolies.

Statute of limitations-fraudulent concealment. The drug retailers' complaint alleges that Takeda and TWi concealed their illegal agreements such that the drug retailers had no way of discovering them until TWi's approved generic was actually launched in January 2022, and therefore, the four-year statute of limitations should be tolled until that time.

The Case is No. 5:25-cv-02785-VKD.

Judge: DeMarchi, V.

Attorneys: Anna Theresa Neill (Sperling Kenny Nachwalter, LLC) for Walgreen Co., Albertsons Companies, Inc. and The Kroger Co.

Companies: Walgreen Co.; Albertsons Companies, Inc.; The Kroger Co.; Takeda Pharmaceutical Co. Ltd.; Takeda Pharmaceuticals U.S.A., Inc.; Takeda Pharmaceuticals America, Inc.; TWi Pharmaceuticals Inc.; TWi Pharmaceuticals USA, Inc.

News: Antitrust CaliforniaNews